Cournot Equilibrium in a Model of Hardware and Software Manufacturers' Interaction

Annales Universitatis Apulensis, Series Oeconomica, Vol. 11, No. 1, p. 4, 2009

11 Pages Posted: 3 Mar 2010 Last revised: 5 Sep 2014

See all articles by Vladimir I. Soloviev

Vladimir I. Soloviev

Institute for Humanities and Information Technology

Natalia A. Iliina

State University of Management

Marina V. Samoyavcheva

State University of Management, Moscow, Russia

Date Written: 2009

Abstract

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

Keywords: Complementors, Complements, Cournot Equilibrium, Pricing

JEL Classification: C72, D43, K21, L13, L15, M21

Suggested Citation

Soloviev, Vladimir I. and Iliina, Natalia A. and Samoyavcheva, Marina V., Cournot Equilibrium in a Model of Hardware and Software Manufacturers' Interaction (2009). Annales Universitatis Apulensis, Series Oeconomica, Vol. 11, No. 1, p. 4, 2009. Available at SSRN: https://ssrn.com/abstract=1562725

Vladimir I. Soloviev (Contact Author)

Institute for Humanities and Information Technology ( email )

53 Verkhnyaya Pervomayskaya
Moscow, 105264
Russia

HOME PAGE: http://visoloviev.ru

Natalia A. Iliina

State University of Management ( email )

99, Ruzyanski Prospect
Moscow, 123060
Russia

HOME PAGE: http://www.guu.ru

Marina V. Samoyavcheva

State University of Management, Moscow, Russia ( email )

99, Ruzyanski Prospect
Moscow, 123060
Russia

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