Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Consider a town with only one street of length 1. There are two pizza stores on the street. Both have zero production cost. Consumers are
Consider a town with only one street of length 1. There are two pizza stores on the street. Both have zero production cost. Consumers are located on the street with uniform density. Each consumer eats only one piece of pizza (i.e., buys from only one of the stores) which generates a utility . The transportation costs are quadratic in the distance needed to travel to the store. That is, if the two stores locate at and , for a consumer located at , her transportation cost to store 1 is ( )2 and her transportation cost to store 2 is ( )2. To sum up, a consumer who locates at , her net utility of buying from store 1 is ( )2 and her net utility of buying from store 2 is ( ). Now, consider a two-stage game: in the first stage, two stores choose the locations simultaneously; and in the second stage, taking locations as given, two stores compete in price. Answer the following Q13-Q15. Q13. What are the locations that the two stores would choose in
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started