Suppose Two Companies,Rosencrantz and Guildenstern,are Both Selling the Same Software

question 150

Essay

Suppose two companies,Rosencrantz and Guildenstern,are both selling the same software technology,Alpha.They have an equal share in the market,which is worth a total of $100,000.However,both companies are deciding whether to develop the next generation software,Beta,which has huge market potential.Beta's probability of success is 0.60.If only one company enters the Beta market,the entire market is worth $250,000.On the other hand,if both companies introduce Beta,the successful market value would be only $150,000 since competition would reduce the price.If both succeed,both would hold an equal share in the Beta market as well.
If Beta fails,the total market would only be $20,000 regardless of how many companies enter the market.
In addition,the company not entering the Beta market could capture Alpha's market all to themselves (launching Beta means a loss of all Alpha sales)
Should either company continue to develop Beta? How could one company gain an advantage?

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Definitions:

Yan Liben

a prominent Chinese painter and government official of the Tang Dynasty, renowned for his portraits, particularly of historical figures and court members.

Exemplar Virtue

An individual or character that embodies ideals and moral qualities that are admired or sought after, serving as a model for ethical behavior.

Thirteen Emperors

A series of portraits by the Chinese painter Yan Liben, depicting thirteen Chinese emperors from various dynasties, showcasing the imperial lineage and Confucian ideals of governance.

Shang Bronze

Artifacts made of bronze from the Shang Dynasty (c. 1600–1046 BCE) in China, renowned for their artistic and technological sophistication.