Question
In 2010, global sales of Windows-based desktop computers were 351 million units, whereas average price was $605.1 The leading market shares were as follows: HP,
In 2010, global sales of Windows-based desktop computers were 351 million units, whereas average price was $605.1 The leading market shares were as follows: HP, 17.9%; Acer, 13.9%; Dell, 12%; Lenovo, 10.9%; Asus, 5.4%; others, 39.9% equally distributed across 10 firms. Suppose that the Cournot model provides a good approximation of the industry's behavior. Suppose moreover that inverse demand is given by p = a b Q; each firm has constant marginal cost; and that, from previous studies, the price elasticity of market demand is estimated to be -0.5 (at the market equilibrium level)
- (a)Based on the observable data, estimate each firm's marginal cost and margin.
- (b)Suppose that Dell's marginal cost decreases by 5%. Based on your answer to the previous question, estimate the impact of this cost decrease on equi- librium price and on Dell's market share.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started