Duopoly Model in 3D

slope of marginal costs of firm X:

C

x

C

x

0.5

marginal costs of firm Y:

C

Y

C

Y

0.25

demand projections

marginal revenue curves

axes labels

front box

Nash Equilibrium:

{Q

x

,

Q

Y

}

{0.25,0.25}

Duopoly (oligopoly with two firms) is a topic that is equally important for the game-theoretic approach to economic analysis and for traditional microeconomic exposition of market structures with demand and supply curves. Ironically, these two views are rarely presented together in textbooks. The purpose of this Demonstration is to show the straightforward connection between the supply-demand model and the game-theoretic representation of reaction functions in a classical duopoly setting.