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duopoly
At the Cournot model the two firms "play" at the same time, each knowing the other's reaction curve. In this way, Cournot equilibrium will occur when the curves equalize. That is, a quantity supplied by firm 2 , which causes a quantity supplied response by firm 1 , which, in turn, generates the same quantity supplied by firm 2 initially - so it is a very classic Nash equilibrium. In the Stackelberg Model the lead firm has an advantage over the follower firm: it sees the follower's reaction curve and chooses a point on that curve. That is, the leading firm will offer an amount X already knowing the reaction of the follower curve, in order to maximize its profit.
Subtitle
RF = Reaction Curve
Q = Quantity
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