11. advanced analysis Suppose you are playing a game in which you and one other person each picks a number between 1 and 100, with the person closest to some randomly selected number between 1 and 100 winning the jackpot.

(Ask your instructor to fund the jackpot.) Your opponent picks first. What number do you expect her to choose? Why?

What number would you then pick? Why are the two numbers so close? How might this example relate to why Home Depot and Lowes, Walgreens and Rite-Aid, McDonald’s and Burger King, and other major pairs of rivals locate so close to each other in many well-defined geographical markets that are large enough for both firms to be profitable?

LO14.6