AP MicroeconomicsMarket Structures
Cournot Competition
Cournot competition is an oligopoly model where firms simultaneously choose how much quantity to produce, and the combined output sets the market price.
Each firm picks its output taking rivals' outputs as given, and equilibrium occurs where their reaction functions intersect (a Nash equilibrium in quantities). The result lies between monopoly and perfect competition: price exceeds marginal cost and firms earn positive profit, but less than a monopolist would. As the number of firms rises, the outcome approaches the competitive one.
Formula / Example
Each firm sets MR = MC given rivals' output; equilibrium where reaction functions intersect