Question:
Global Crossing is a major provider of fiber optic cable capacity - having a 70% market share. It is in possession of a technology that has the capability of expanding capacity (output) of its product by 20% without any increase in Global Crossing''s cost. The overall market elasticity of demand for such capacity is -0.6.
a) what will happen to the market price should Global Crossing introduce the new technology - assuming other competitors do not react to Global Crossing''s action?