Question
Hello, could you pls help me with following problem? Intel and AMD the primary producers of computer central processing units, compete with each other in
Hello, could you pls help me with following problem?
Intel and AMD the primary producers of computer central processing units, compete with each other in the mid-range chip category (among other categories). Assume that global demand for mid-range chips depends on the quantity that the two firms make, so that the price (in dollars) for mid-range chips is given by: P = 210 - Q, where Q = qintel + qAMD and where the quantities are measured in millions. Each mid-range chip costs intel 60$ to produce. AMD's production process is more streamlined; each chip costs only 48$ to produce.
(a)Write the profit function for each firm in terms ofqintel and qAMD. Find each firm's best-response rule.
(b)Find the Nash equilibrium price, quantity, and profit for each firm.
(c)(Bonus) Suppose Intel acquires AMD, so that it now has two separate divisions with two different production costs. The merged firm wishes to maximize total profits from the two divisions. How many chips should each division produce? (Hint: you may need to think carefully. About this problem, rather than blindly applying mathematical techniques.) What is the market price and the total profit for the firm?
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