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Reaction curves

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  • Giocoli, Nicola

Abstract

A reaction curve RC, also called reaction function or best-reply function, is the locus of optimal, i.e. profit-maximizing, actions that a firm may undertake for any given action chosen by a rival firm. The RC diagram is the standard tool for the graphical analysis of duopoly. In the diagram the market equilibrium is at the intersection of the RCs, one for each firm. The commonest case of RC diagram is that of the Cournot duopoly model.

Suggested Citation

  • Giocoli, Nicola, 2008. "Reaction curves," MPRA Paper 33809, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:33809
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    References listed on IDEAS

    as
    1. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    2. Nicola Giocoli, 2003. "“Conjecturizing” Cournot: The Conjectural Variations Approach to Duopoly Theory," History of Political Economy, Duke University Press, vol. 35(2), pages 175-204, Summer.
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    More about this item

    Keywords

    reaction curves; duopoly; Cournot;
    All these keywords.

    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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