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Omega is a communications software rm, providing interface software between input suppliers and downstream auto companies over two periods. Suppose MC=0 and FC=$4m in each
Omega is a communications software rm, providing interface software between input suppliers and downstream auto companies over two periods. Suppose MC=0 and FC=$4m in each period. Demand for the software is normally P=3000 0.2q in each of two periods. However, signicant network effects exist for this software, so if Omega sells 12,000 units or more in the rst period, then demand in the second period increases to P=4000 - 0.2q. Calculate the total prot over both periods when selling 12,000 units in period 1 and then the prot- maximizing quantity in period 2 given the greater demand. Does Omega earn greater prot using this strategy compared to selling less and choosing the prot-maximizing price in period 1? Show and explain
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