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Game theory in computer microprocessors

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Advanced Micro Devices announced a 10% price increase for certain advanced microprocessors, used primarily in video games. The processors will sell for about $1,000 compared to Intel's $950 price. Why do you suppose AMD would announce publicize such a strategic move? Is this consistent with what you understand of game theory?

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Solution Summary

Game theory and oligopoly as it applies to AMD and Intel are provided.

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AMD is acting as a price leader in this situation. In oligopolies, such as the microprocesor industry, each company watches the moves of the others carefully. Often, one will take the lead in establishing ...

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