... level of output that firm B might choose, firm A has a so-called 'best response', which will maximize its output given firm B's choice, and for every output level firm A might choose, firm B has its own best response. The set of all best responses forms the best response function. In the Cournot model, the intersection point of the two best response curves will be the equilibrium outcome of the market. Cournot's argument for this is not very convincing, as it does not apply to one-shot games, assuming that both firms sequentially adjust their levels of output along their best response curves, ending up at the intersection point in equilibrium where neither firm wants to change its output given the other's output choice. However, game theory offers a different reasoning for the same equilibrium outcome. Each firm is assumed to think through its choices of strategy, knowing that the ...

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