Question
Intel and AMD are duopolists in the CPU market. Their products (Intel Core(R) and AMD RyzenTM) are slightly different, and the demand functions for their
Intel and AMD are duopolists in the CPU market. Their products (Intel Core(R) and AMD RyzenTM) are slightly different, and the demand functions for their products are qI = 10 - 2PI + PA qA = 10 - 2PA + PI Notice that, the demand for each firm's product is higher if its own price is lower or if it's competitor's price is higher. Assuming marginal cost of CPU is 4 for both Intel and AMD. Derive the (Cournot) equilibrium production for Intel and AMD. (a) find the inverse demand function PI, PA as functions of qI and qA. (Hint: AMD's demand function implies PI = 2PA + qA - 10. Substitute PA out using Intel's demand function. You then have Intel's inverse demand function with PI on the left-hand-side, and qA and qI on the right-hand-side. Apply the similar procedure to find AMD's inverse demand function with PA on the left-hand-side, and qA and qI on the right-hand-side.) (b) Find the equilibrium price of CPU given the inverse demand functions from part (a),
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started