(i) In the context of an oligopoly framework (such as "Cournot" for "hardware" products;or differentiated-product "Bertrand" for "software" products) explain the

channels via which either a cost reduction (a process innovation) or a quality

increase (a product innovation) influences a supplier's profitability.

(ii) Describe a real situation in which a supplier faced (or faces) an innovation opportunity.

Explain why the theoretical framework described in part (i) is suitable for

this situation. Evaluate the supplier's innovation decision.