Let us assume that in figure Vin1 - Vin2 varies from $-\infty$ to $\infty$ . If Vin1 is much more negative than Vin2, M1 is off, M2 is on, and Id2 = Iss. Thus, Vout1 = Vdd and Vout2 = Vdd - Rd.Iss. As Vin1 is brought closer to Vin2, M1 gradually turns on, drawing a fraction of Iss from Rd1 and hence lowering Vout1. Since, Id1 + Id2 = Iss, the drain current of M2 decreases and Vout2 rises.

As shown in figure (a), for Vin1 = Vin2, we have Vout1 = Vout2 = Vdd - Rd.Iss/2. As Vin1 becomes more positive than Vin2, M1 carries a greater current than M2 does Vout1 drops below Vout2. For sufficiently large Vin1 - Vin2, M1 hogs all of Iss, turning M2 off. As a result, Vout1 = Vdd - Rd.Iss and Vout2 = Vdd. Figure (b) plots (Vout1 - Vout2) versus (Vin1 - Vin2).

The forgoing analysis reveals two important attributes of the differential pair. First, the maximum and minimum levels at the output are well-defined (Vdd and Vdd - Rd.Iss respectively) and independent of the input CM level. Second, the small signal gain is maximum for Vin1 = Vin2 gradually falling to zero as | Vin1 - Vin2 | increases. In other words, the circuit becomes more nonlinear as the input voltage swing increases. For Vin1 = Vin2, we say the circuit is in equilibrium.