Considering Hoteling's linear city with endogenous prices and endogenous ( symmetric) location ( hint: firm 2 position itself symmetric to firm 1 in location a and ( 1-a) . Two firms produce two homogenous products with value v=30. let assume that consumers face a quadratic transportation cost with t=1

Question 1 :

Compute optimal pricing of each of the firms in the game where firms in the game where firms simultaneously first choose location and then compete in prices :

A ) ALL other solutions are wrong

b) p 1 = p2 = c-1+ 2 a

c) p1 = p2 = c+1-2a

d) p 1 = p2 = c+1 + 2a