Describe which reduces the marginal cost

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You are a manager of Nvidia and your only significant competitor in the mainstream graphics card market is the ATI subsidiary of Advanced Micro Devices. You and ATI both expect to produce the next generation of graphics card in October of next year. Your graphics cards and ATI's graphics cards are indistinguishable to consumers. The inverse market demand for graphics cards is P = 4-Q (in dollars) and both firms used to produce at a marginal cost of $2.00. However, you just found a better way to produce graphics cards, which reduces your marginal cost to $1.00. Should you keep that procedure to yourself? Or is it better to sell that secret to ATI so that both you and ATI can produce at marginal cost equal to $1.00?

Reference no: EM13223222

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