A duopoly is a market in which two firms sell a product to a large number of consumers. Each consumer is too small to affect the market price for the product: that is, on the buyers’ side, the market is competitive. Therefore, in its essence duopoly is a two-player variable-sum game. Each of the two duopolists is a rational decision-maker whose actions will affect both himself and his rival. Although the interests of the duopolists are intertwined, they are not wholly coincident nor wholly in conflict. In contrast to the agents in competitive markets, the duopolists must each concern themselves with what the other duopolist is likely to do.
KeywordsGame Theory Output Level Noncooperative Game Cournot Equilibrium Conjectural Variation
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