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Intel and Advanced Micro Devices (AMD) are the only two firms that produce central processing units (CPUs)-the brains-for personal computers. Assume that the two firms'
Intel and Advanced Micro Devices (AMD) are the only two firms that produce central processing units (CPUs)-the brains-for personal computers. Assume that the two firms' estimated inverse demand and marginal revenue functions are symmetric as follows: PA = 490 - 10qA - 6q1, PI = 490 - 10q1 - 6qA, MRA = 490 - 20qa - 6q1, MRI = 490 - 20q1 - 6qA, where price is dollars per CPU, quantity is in millions of CPUs, the subscript / indicates Intel, and the subscript A represents AMD. Each firm faces a constant marginal cost and average cost of $40 per unit. (For simplicity, we assume that firms have no fixed costs.) Assume that both firms engage in Cournot competition. Solve for each firm's Nash equilibrium quantity, price, and profits
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