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

affiliation not provided to SSRN; 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 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)

affiliation not provided to SSRN ( email )

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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