There are two existing firms in the market for computer chips. Firm A knows how to...
There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/2. If A innovates and B does not, A earns $20 in revenue while B earns $0. If A innovates and B does likewise, both firms earn $15 in revenue. If neither firm innovates, both earn $5. Under what condition will firm A innovate?
(Please provide detail step by step procedure to make it better
to get it thanks)
|
A. |
C > 30 |
|
B. |
C < 30 |
|
C. |
10 > C > 0 |
|
D. |
35 > C > 25 |
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