Advanced Micro · intermediate
What moves on the Cournot Competition diagram
Higher own costs pull a firm's reaction curve in; the rival's best response is to expand, share shifts to the efficient firm.
Start at the symmetric Nash equilibriumNash equilibriumA strategy profile where no player can gain by changing their choice alone..
Firm 1's costs rise, its best response shifts inward.
Firm 1 retreats and firm 2 rationally expands into the gap: cost shocks reallocate market share through strategy.
Examiners ask this as: asymmetric cost duopoly, rival gains share.
Other scenarios on Cournot Competition