ABSTRACT
This chapter begins our consideration of oligopoly theory with the introduction of important models developed during the nineteenth and twentieth centuries. These models were originally derived without the use of game theory and, as a result, sometimes seemed to be based on questionable assumptions. The application of game theory to oligopoly modeling has made it possible to obtain many of the theoretical results using what are generally regarded as more reasonable assumptions. Augustin Cournot made the first attempt at formal modeling of oligopoly behavior. Cournot considered the case of a duopoly market with two identical firms. The firms face identical costs and there is no product differentiation. The formal analysis here, but this extreme result can be made much more reasonable by introducing some product differentiation into the Bertrand model. Karp and Perloff examined the coffee export market between 1961 and 1984 to determine whether the market conduct of the world's two largest coffee export countries, Brazil and Columbia.
