What Is the Difference Between Convergent and Divergent Cournot Equilibria

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The Answer is A convergent process occurs when the reaction function for firm 2 is flatter than the reaction function for firm 1. As the firms choose quantities and react to each other, the process will lead the firms to converge on the intersection of the reaction functions. This is a stable equilibrium. A divergent process occurs when the reaction function for firm 2 is steeper than the reaction function for firm 1. As the firms choose quantities and react to each other, the process will lead the firms to move away from the intersection of the reaction functions. This is an unstable equilibrium.

What Is the Difference Between Convergent and Divergent Cournot Equilibria

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What Is the Difference Between Convergent and Divergent Cournot Equilibria

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