In 2008, a Former Intel Engineer Has Been Charged with Stealing

question 75

Multiple Choice

In 2008, a former Intel engineer has been charged with stealing trade secrets worth $1 billion. Intel owns 80 percent of the worldwide market for microprocessors, AMD has the rest. Conducting R&D is very expensive so suppose that each of these firms can either steal R&D or develop their own R&D. If both firms develop their own R&D, economic profit will be $50 million each. If one company steals R&D, that firm earns $100 million in economic profit while the other firm earns $10 million. If both firms steal R&D, each firm breaks even. What is the outcome of this game?

• A) Both firms will conduct R&D.
• B) Both firms will steal R&D.
• C) The outcome will be a dominant strategy equilibrium.
• D) Only one firm will conduct R&D, but we cannot predict which firm will conduct R&D.

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Definitions:

Monopolistically Competitive Firm

A Monopolistically Competitive Firm operates in a market structure characterized by many firms offering products that are similar but not identical, allowing for some degree of market power in setting prices.

Homogeneous

A description of products or services that are identical in quality and cannot be distinguished from one another by consumers.

Monopolistically Competitive

Describing a market structure where many companies sell products that are similar but not identical, leading to competitive prices and product differentiation.

Demand Schedule

A chart that displays the quantity of a good or service demanded at various prices.