Consider the model of price competition with heterogeneous goods on a Salop city. Assume that the industry consists of four firms on a circle with unit circumference located 1/4 from each other. Moving clockwise, call the consecutive firms A, B, C and D respectively and assume that the firms have symmetric and constant marginal costs c 2 0. The firms simultaneously set prices PA, PB, Pc and PD respectively. On the city, consumers are uniformly distributed with unit density, and each has unit demand and enjoys utility u= v - p - tx ifp v-tx Assume that there is full market coverage. (a) Derive the equilibrium outcome when each firm remains independent, i.e., industry structure {{A}, (b) Derive the equilibrium outcome when firms A and B merge and firms C and D merge, respectively, i.e., industry structure {{A,B}, {C,D} }