Lambert-Rogers Company is a manufacturer of petrochemical products. The firm's research efforts have resulted in the development of a new auto fuel injector cleaner that is considerably more effective than other products on the market. Another firm, G.H. Squires Company, independently developed a very similar product that is as effective as the Lambert-Rogers formula. To avoid a lengthy court battle over conflicting patent claims, the two firms have decided to cross-license each other's patents and proceed with production. It is unlikely that other petrochemical companies will be able to duplicate the product, making the market a duopoly for the foreseeable future. Lambert-Rogers estimates the demand curve given below for the new cleaner. Marginal cost is estimated to be a constant $2 per bottle.
Q = 300,000 - 25,000P.
where P = dollars per bottle and a. Lambert-Rogers and G.H. Squires have very similar operating strategies. Consequently, the management of Lambert-Rogers believes that the Cournot model is appropriate for analyzing the market, provided that both firms enter at the same time. Calculate Lambert-Rogers's profit-maximizing output and price according to this model.
b. Lambert-Rogers's productive capacity and technical expertise could allow them to enter the market several months before Squires's. Choose an appropriate model and analyze the impact of Lambert Rogers being first into the market. Should Lambert-Rogers hurry to enter first?

Question

Lambert-Rogers Company is a manufacturer of petrochemical products. The firm's research efforts have resulted in the development of a new auto fuel injector cleaner that is considerably more effective than other products on the market. Another firm, G.H. Squires Company, independently developed a very similar product that is as effective as the Lambert-Rogers formula. To avoid a lengthy court battle over conflicting patent claims, the two firms have decided to cross-license each other's patents and proceed with production. It is unlikely that other petrochemical companies will be able to duplicate the product, making the market a duopoly for the foreseeable future. Lambert-Rogers estimates the demand curve given below for the new cleaner. Marginal cost is estimated to be a constant $2 per bottle.
Q = 300,000 - 25,000P.
where P = dollars per bottle and  a. Lambert-Rogers and G.H. Squires have very similar operating strategies. Consequently, the management of Lambert-Rogers believes that the Cournot model is appropriate for analyzing the market, provided that both firms enter at the same time. Calculate Lambert-Rogers's profit-maximizing output and price according to this model.
b. Lambert-Rogers's productive capacity and technical expertise could allow them to enter the market several months before Squires's. Choose an appropriate model and analyze the impact of Lambert Rogers being first into the market. Should Lambert-Rogers hurry to enter first?

Quizplus · Accepted Answer

The Answer of Lambert-Rogers Company is a manufacturer of petrochemical products. The firm's research efforts have resulted in the development of a new auto fuel injector cleaner that is considerably more effective than other products on the market. Another firm, G.H. Squires Company, independently developed a very similar product that is as effective as the Lambert-Rogers formula. To avoid a lengthy court battle over conflicting patent claims, the two firms have decided to cross-license each other's patents and proceed with production. It is unlikely that other petrochemical companies will be able to duplicate the product, making the market a duopoly for the foreseeable future. Lambert-Rogers estimates the demand curve given below for the new cleaner. Marginal cost is estimated to be a constant $2 per bottle.
Q = 300,000 - 25,000P.
where P = dollars per bottle and  a. Lambert-Rogers and G.H. Squires have very similar operating strategies. Consequently, the management of Lambert-Rogers believes that the Cournot model is appropriate for analyzing the market, provided that both firms enter at the same time. Calculate Lambert-Rogers's profit-maximizing output and price according to this model.
b. Lambert-Rogers's productive capacity and technical expertise could allow them to enter the market several months before Squires's. Choose an appropriate model and analyze the impact of Lambert Rogers being first into the market. Should Lambert-Rogers hurry to enter first?

Lambert-Rogers Company Is a Manufacturer of Petrochemical Products