Each firm makes an assumption about how much the other will produce, and sets its own output at the level which will maximize its profit if the other firm behaves as assumed

Each firm has a reaction curve showing its chosen output for different outputs that the other might set

The equilibrium is where the reaction curves intersect

If the duopolists produce homogeneous products, then the equilibrium price will be the same as if the industry had a monopoly

The model assumes one firm is a price leader

Each firm makes an assumption about the price that the other will set, and sets its own price at the level which will maximize its profit if the other firm behaves as assumed

Each firm has a reaction curve showings its chosen price for different prices that the other might set

If the duopolists produce homogeneous products, then the equilibrium price will be the same as would arise if the industry was in perfect competition

Why an oligopolist’s price is what it is

Why an oligopolist might find that its sales fell greatly if it raised its price

Why an oligopolist might find that its sales increased little if it cut its price

Why an oligopolist might not change its price, even if the prices of variable inputs changed

A situation where each player adopts their dominant strategy

A situation where each player adopts the best strategy for them, given the strategy adopted by the other

A situation where the combined payoffs of the players is the maximum possible

The outcome that will arise in a game

A game where neither player has a dominant strategy

A game where each player would have a better payoff if each adopted their non-dominant strategy rather than their dominant strategy

A game where there is no Nash equilibrium

A game which applies only to prisoners