| Summary: | In this paper, we consider duopoly equilibria in which firms act rationally on the basis of mutually consistent assumptions about their rivals' behaviour. It turns out that there exist various kinds of equilibria corresponding to various pairs of behaviour patterns. Depending on the relation between the firms' cost functions and the market demand functions there are different outcomes: monopoly, limit-pricing, stable asymmetric duopoly with one firm a price-maker and the other (less efficient) firm a price-taker, and unstable symmetric duopoly which might have price competition (as in Bertrand, 1883) or quasi-agreement (Fellner, 1960).
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