Question

Suppose the market for smartphones in Australia is oligopolistic with three firms owning the entire market: Apple, Samsung and Google. (a) Suppose all the products are unbranded (homogeneous) and all three firms have similar cost functions. What would be the best outcome for consumers in this market and what is the best outcome for the three oligopolists? Which one is the efficient outcome? (b) Suppose Apple can differentiate its smartphone by using a different operating system than the other two firms. This would increase the marginal cost of Apple to a point above the other two firms. How would your answers to part (a) change? (c) Suppose all three firms have different cost functions and heterogeneous products. What would be the predicted outcome in this case?

Answer 1

Each Company has a unique user interface in its market. If the products are unbranded and have similar cost functions (i)Obviously Apple mobiles will be demanded more by the consumers because of the privacy terms and norms of the apple.(ii) If the apple company provides a different operating system the apple company can have a loss because of the differentiation. so they do not provide a different basis. (iii) If the all three irms have different cost functions peoples will deemand samsung mobiles as they need a budgeted spec mobiles.