Chamberlins Model

Chamberlin's Model makes an important improvement over Cournot's Model as it dispenses off with the assumption that the rival producers do change their output plans. On the contrary, Chamberlin assumes that the rival producers do learn from their past miscalculations and change their production plans accordingly. He believes that though initially, the firms assume that others will not change their output and hence reactions and counter reactions are bound to be there. Thus, if there are two firms A and B who initially decide their output on Cournot’s Model on the assumption that when A changes output, B as well have to change his output in reaction to B. in such a competition both A as well as B will be the losers. Hence, both realize that they are dependent upon each other. Therefore, instead of competing with each other, they would rather decide to produce such quantities of output that both get maximum profits by not competing with each other.