If a Cournot duopolist announced that it will double its output,
A) it becomes the leader.
B) the other firm does not view the announcement as credible.
C) the other firm will shut down.
D) the other firm will double output also.

Question

Quizplus · Accepted Answer

In a Cournot duopoly, each firm assumes that the output of the other firm remains constant when making production decisions. If one firm announces that it will double its output, the other firm may not view this as credible information and will continue to base its output decision on the original assumptions. Therefore, the answer is B. The other options are incorrect as becoming the leader or shutting down is unlikely based solely on one firm's announcement, and it is not guaranteed that the other firm will match the output increase.

If a Cournot Duopolist Announced That It Will Double Its