Question

SQ7(7 minutes)

Maxime is indifferent over whether to get an iPhone or an Android

phone, and plans to get whichever yields the lower monthly costs. In S

witzerland, where she lives, Apple provides Phones only to two mobile carriers, BernBrats (B) and GeneveAmis (G); Samsung provides Android phones only to two mobile carriers, Anfung (A) and Swiss Telecom (S). None of these 4 carriers has any customer loyalty, all four provide a free phone but require a 30-month contract, and the demand curves for iPhone and services, and for Android phone and services, accounting for customers who do have preferences over which phone they use, are approximately identical, as are the firms’ costs (including constant marginal costs). Absent consumer loyalty, the firms are afraid to compete via prices, and so compete by deciding how many phones to order per 3-month period. As it happens, BernBrats and GeneveAmis place their orders simultaneously. However, Swiss Telecom owns a significant fraction of Samsung stock, and gets to place its order before Anfung. Which phone will Maxime choose, or will she be indifferent?

Briefly but carefully explain.

[More than 3 sentences certainly sounds ca

reless.]

Answer 1

In android we can see that Swiss Telecom has an upper hand over Anfung where at a particular point of time, one will be left only with Swiss Telecom and this can reduce the loyalty of service of android. On the other hand iPhone carriers are equally places where they both strive towards better customer satisfaction in order to sustain in the market which forces them to be more loyal and provide at less costs and even better customer support. Therefore keeping this in view, Maxime chooses iPhone on the whole.