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Cournot Equilibrium In A Model Of Hardware And Software Manufacturers’ Interaction

Author

Listed:
  • Vladimir I. Soloviev

    (State University of Management Moscow)

  • Natalia A. Iliina

    (State University of Management Moscow)

  • Marina V. Samoyavcheva

    (State University of Management Moscow)

Abstract

A model of interaction between hardware vendors, Intel and AMD, and developers ofWindows and Linux operating systems is suggested. Intel and AMD both maximize profits forming atraditional oligopoly, while Microsoft and the community of Linux developers form a mixedduopoly, in which only the first party maximizes its profit. We consider a Cournot situation, wheneach of the profit-maximizing suppliers sets the price based on available market information onother players’ products prices in the previous time moment, and assuming the cross-priceelasticities to zero. At the Cournot equilibrium, an Intel-based PC running Windows is 5 times moreexpensive than AMD-based PC running Linux; an Intel CPU costs 2 times more than AMDprocessor; Windows license is 1,5 times more expensive than Intel processor; and the profit of Intelis 4 times greater than the profit of AMD, while Microsoft has just 12,5% greater profit than Intel.

Suggested Citation

  • Vladimir I. Soloviev & Natalia A. Iliina & Marina V. Samoyavcheva, 2009. "Cournot Equilibrium In A Model Of Hardware And Software Manufacturers’ Interaction," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(11), pages 1-4.
  • Handle: RePEc:alu:journl:v:1:y:2009:i:11:p:4
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    References listed on IDEAS

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    More about this item

    Keywords

    complementors; complements; co-opetition; Cournot equilibrium; pricing.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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