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4. Two different children are operating very mobile lemonade stands (it is costless for each child to move their stand) on the same street. Residents,
4. Two different children are operating very mobile lemonade stands (it is costless for each child to move their stand) on the same street. Residents, who are evenly distributed throughout the street, regularly purchase lemonade from the closest stand, and are indifferent between equidistant stands. After a period of time each lemonade stand moves a little to one side or the other if it will increase their revenue. Assume we begin with one stand on the far eastern end of the street and the other on the far western end. (a) If the children can always increase their profits by selling more (thereby increasing revenue), what are we implicitly assuming about their costs? (b) In equilibrium, where will these lemonade stands be?3
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