M1-M2 form a long-tail pair with I1. This is the core of the differential amplifier.
I1 has the effect of making it impossible for both M1 & M2 to conduct at maximum simultaneously. M1 might conduct a lot, and M2 a little. Or vice versa. But never both at maximum, even if both are biased to turn on fully.
Notice if M1 is conducting medium, and M2 then is turned on high, then it can cause M1 to conduct low or even to turn off. This interaction is not obvious from looking at a simple schematic. The interaction is not easy to predict. So it is not easy to predict what the output will be.
Your equivalent circuit needs to make I1 govern both M1 & M2, somehow. That is a chief principle in the differential amplifier.