Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that: Consumers' preferences are uniformly distributed on the unit interval. Prices are fixed such that (p-c) = 1 and the number of consumers has

image text in transcribed
Assume that: Consumers' preferences are uniformly distributed on the unit interval. Prices are fixed such that (p-c) = 1 and the number of consumers has been normalized to one. Firms enter sequentially and incur a startup cost of 1/6. Suppose that startup costs are not sunk-firms can costlessly relocate. What is the free-entry number and location of firms? [Hint: The equilibrium to the game in which firms enter sequentially, but fixed costs are not sunk, is the same as an alternative game in which firms simultaneously choose their locations but fixed startup costs are sunk. In the simultaneous-location-and-entry game, we can find the Nash equilibrium by separating the location and entry decisions. First find the equilibrium to the location game with a fixed number of firms. The outcome of the location decisions and game determines the profitability of entry)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Lakeside Company Case Studies In Auditing

Authors: John Trussel, J. Douglas Frazer

12th Edition

0132567253, 978-0132567251

More Books

Students also viewed these Accounting questions