Cournot Equilibrium in Factor Markets

Abstract

Cournot's classic oligopoly model has two mineral water sellers whose products are perfect substitutes. Cournot studies equilibrium when each duopolist believes the other's quantity choice is invariant to his own action. Cournot also studied the case of dupolists producing perfect complements, copper and zinc, which are used in fixed proportions to produce brass. In this case Cournot studies equilibrium where each duopolist believes the others price is invariant to his own action. This paper unifies Cournot's two theories of duopoly as special cases of a more general technology and discusses the existence of Cournot equilibrium in price and quantity in general. There is seen to be a neat duality between equilibrium in price and in quantity (generalizing an observation of Hugo Sonnenschein).