Suppose that two laptop manufacturers, Dell and Hewlett Packard ( denoted D and HP , respectively )
Question:
Suppose that two laptop manufacturers, Dell and Hewlett Packard denoted D and HP respectively compete in output, where output is defined as daily number of laptops sold. The inverse daily laptop demand function is PQQ where P is the price of a laptop, Q qD qHP is total daily laptop demand and qi denotes the daily production of company i i DHP
Assume that both companies have a constant marginal production cost of and that they have complete and perfect information.
a Derive and illustrate the output reaction functions of the companies.
b What is the Nash equilibrium outcome if the companies simultaneously choose their output levels?
c Suppose that Dell chooses its output first. Hewlett Packard observes Dells choice and then makes its own output decision. What is the subgame perfect Nash equilibrium in outcome and strategies?
d Explain the reason for any differences in parts b and c and illustrate on the diagram in a
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr