A strip is one mile long with 10,000 over-the-top consumers distributed equally across the Strip. These consumers, will all go to the closest firm and pay $1,100 per item at a cost to either purveyor of $100 each. Having not considered the possibility of a competitor, the incumbent owner opened his store in the middle of the strip (at .5). For now, assume that the owner can't move to another location on the Strip and cannot open an additional outpost.

a. If the fixed cost of entry is $4,000,000 and a new entrant wants to open at most one establishment, where would he locate?

b. If the fixed cost of entry is $4,000,000 and the new entrant can open as much firms as he would like, how many would he open, and where would he locate them on the Strip?

c. If the owner had foreseen the potential entry of his new rival (the entrant), how many stores should he have opened on the Strip, and where should he have located them?