Cournot oligopolists producing compatible components also have some influence over expectations. A natural way to model the influence of oligopolists on output expectations is to assume that every oligopolist takes the output of all others as given and sets the expectation of consumers of his own output. The analysis can easily be extended to monopolistic competition among compatible oligopolists if firms face downward-sloping average cost curves as shown in Figure 6.
Firms produce on the downward-sloping part of the fulfilled expectations demand.
At a monopolistically competitive equilibrium, the AC curve is tangent to the fulfilled expectations demand at q j .