• Best Response Curve: A function that determines one’s best response value of the strateigic variable, given the opponent’s strategic variable value.
    • This is equivalent to the pure strategy function (see definition)
  • denotes residual demand for one firm


  • Assume that products are identical [=no differentiation]
  • Assume there are two firms in the market
  • Assume that is constant


There are thus 2 ways to fill in the gap between 2-firm oligopoly and perfect compeition:

  1. N-firm Oligopoly as an extension of Cornout’s 2-firm oligopoy analysis
  2. Monopolistic Competition, where firms strategically set differentiation and price