Consider the market for a given piece of hardware – a photocopier of brand x, for example – that needs after-sale servic

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Consider the market for a given piece of hardware – a photocopier of brand x, for example – that needs after-sale servicing. Suppose that there is free entry into this after market. Servicing photocopiers implies a fixed cost of F and a marginal cost of 𝑐∙𝑥, where x is the number of units serviced. Total demand for servicing is given by D = S(a − p), where p is price and S the number of photocopier owners. Finally, suppose that firms in the after market compete a` la Cournot.
a. Find the equilibrium number of firms in the after-market.
b. Find the consumer surplus in the aftermarket.
c. Relate this result to the discussion on indirect network externalities.