Cournot Model of Duopoly with Incomplete Information

Abstract

Cournot (1838) anticipated Nash's definition of equilibrium by over a century, but only in the context of a particular model of duopoly. Not surprisingly, Cournot's work is one of the classics of game theory; it is also one of the cornerstones of the theory of industrial organization. We consider a modification of the Cournot's model with an uncertainty in the demand. We find the Bayesian Nash equilibrium of the game.