Cournot Competition, explained.
Cournot competition models firms choosing production quantities while the market price depends on total output. A firm's best quantity depends on the output it expects from rivals.
Why it happens
Adding output sells more units but lowers the common price. With this linear demand and cost of 20, profit is q×(80−q−rival) while price remains above cost. The best response to a fixed rival quantity is half the residual amount, max(0, (80−rival)/2).
Cournot competition models firms choosing quantities. Each firm's quantity changes the common market price and therefore the profitability of the other's production.
Read the result
Set the rival's fixed quantity, then adjust your own output and submit. Compare profit with the best-response quantity reported by the board. When you increase output too far, more sales can accompany lower or negative profit. The bot's disclosed quantity is a learning aid rather than hidden simultaneous play.
A worked example
A producer facing a rival's 20 units
The rival produces 20 and you choose 20, giving price 60 and your profit 20×40=800 teaching tokens.
Increase your production to 30: total output becomes 50, price becomes 50, and your profit becomes 30×30=900.
At 40 units your profit returns to 800. The improvement stops because your extra production also lowers the margin on every unit.
OPTIONAL DEEPER DETAILGo deeper: inside the model
Inside this model
Price is max(0, 100 − your quantity − rival quantity), unit cost is 20, and profit is quantity × (price − 20). The best response is max(0, (80 − rival quantity)/2). The symmetric continuous Cournot benchmark is 80/3 units each; slider choices are integer units.
Where this idea is useful
A practical use
A commodity producer can face a tradeoff between selling more units and depressing the price received on all units.
A common misconception
“Selling more units always increases profit.”
Revenue per unit falls as total output rises here, while each unit still costs 20. Past the best response, the margin reduction outweighs the additional sales.
What this explanation leaves out
- The rival output is held fixed for the challenge, not an adaptive equilibrium bot. Homogeneous products, linear demand, equal constant costs, and no capacity constraints are teaching assumptions.
What makes the symmetric Cournot benchmark an equilibrium?
At 80/3 units each, each firm's output is the best response to the other's output under the continuous linear model. The challenge holds a rival quantity fixed so you can inspect that reasoning.
Which quantity decision in your work changes the value or price of the units already being supplied?
Associated thinkers
Associations marked provisional are awaiting source review.
Further reading
Explore the original research or the teaching reference behind this experiment.