Question
Assume that convenience store chains A and B are considering opening stores in either Sanjo, a busy downtown area, or in Shijo, a location far
Assume that convenience store chains A and B are considering opening stores in either Sanjo, a busy downtown area, or in Shijo, a location far from the city center; the total number of daily convenience store users is expected to be 2,000 in Sanjo and 1,000 in Shijo. If A and B open stores in different areas, they can monopolize the number of customers in their respective areas, but if they open stores in the same area, A can attract three times as many customers as B. To simplify the discussion, we assume that the fixed cost per customer is the same for both stores. To simplify the discussion, we assume that fixed and marginal costs are zero. In this case, after explaining how B and A respond to the respective strategies of A and B, find the Nash equilibrium of this game.
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