Munich Personal RePEc Archive

Reaction curves

Giocoli, Nicola (2008): Reaction curves. Published in: Famous Figures and Diagrams in Economics, edited by Mark Blaug and Peter J. Lloyd, Edward Elgar, Cheltenham (UK), (2010): pp. 137-144.


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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.

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