COURNOT EQUILIBRIUM IN A MODEL OF HARDWARE AND SOFTWARE MANUFACTURERS’ INTERACTION

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.