1. Consider the Hotelling model of horizontal product differentiation. Suppose that two products (noted 1 and 2) are located at the extreme locations of the (0,1) interval. (Assume firm 1 is located at 0 and firm 2 is located at 1.) Firm 1 and firm 2 have constant marginal costs of c, and ca respectively for production and maximize profits ( > C2 > 0). Consumers are uniformly distributed on the unit interval and incur a disutility from traveling to the lo- cation of the product, which is linear in distance. i) Are the price charged by both the firms the same in the equilibrium? ii) Assume that at the equilibrium all the consumers buy the good (7 not too high) and both the firms make positive profits, then what restriction on traveling cost (1) is required. iii) Explain intuitively about the equilibrium price i t = 0. (6+2+2)