Question

Which of the following is NOT a feature of Cournot competition?

	Firms sell identical products.
	One firm sets its quantity to produce before the other firm.
	All goods sell at the same price.
	Firms compete by choosing a quantity to produce.

Answer 1

Cournot competition is based on following assumptions or features -

1. Each firm accepts the market price and thus has no market power to fix price. In other words, goods in cournot competition are sold at same price.

2. Firms in cournot competition compete with respect to quantity of output they want to produce. However, output decision is independent and simultaneous.

3. The product sold in cournot competition is homogeneous or identical.

Thus, it can be seen that one firm sets its quantity to produce before the other firm is not a feature of cournot competition.

Hence, the correct answer is the option (2).