How would the Intel-AMD equilibrium in the Solved Problem 13.2 change if AMD fac

Question

How would the Intel-AMD equilibrium in the Solved Problem 13.2 change if AMD faced the same demand function as Intel? Intel and Advanced Micro Devices (AMD) are the only two firms that produce central processing units (CPUs), which are the brains of personal computers. Both because the products differ physically and because Intel's advertising "Intel Inside" campaign has convinced some consumers of its superiority, consumers view the CPUs as imperfect substitutes. Consequently, the two firms' inverse demand functions differ: PA-490-10qA-6qi and pl = 490-10q-69A where price is dollars per CPU, quantity is millions of CPUs, the subscript indicates Intel, and the subscript A represents AMD. Each firm faces a constant marginal cost of m assume there are no fixed costs.) Solve for the Cournot equilibrium quantities and prices. $100 per unit. For simplicity, we wil The Cournot equilibrium quantities are 4°Trillion CPUs and million CPUs. (Enter numeric responses using real numbers rounded to two decimal places) The Cournot equilibrium prices are

Explanation / Answer

Pa = 490 - 10qa - 6qi

Ra = Paqa = 490qa - 10qa2 - 6qiqa

MRa = dRa/dqa = 490 -20qa -6qi

Profit is maximized where MRa = MC = 100

20qa + 6qi = 390

Similarly, for the other firm:

20qi + 6qa = 390

qi = qa = 15 mn CPUs (Solve the equations given above to get the quantities)

Pa = Pb = $250

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