Hi! I'm currently taking an economics course and I needed help with these following questions: Consider the
Question:
Hi! I'm currently taking an economics course and I needed help with these following questions:
Consider the horizontal differentiation model of "Linear City" the consumers are uniformly distributed on the segment [0.1]. Consumers have a transport cost td where d is the distance traveled. All consumers have a valuation s. The marginal cost of producing the good is c. The fixed cost to open a store is f for every location.
a) How high would have to be s for a monopolist located at 1/2 decided to put a price at which all consumers are served? (All decide to eat).
b) If F =t/2 and the monopolist must decide between one or two locations, how many locations would it choose? What will be its profit?
Can you help me? Thank you!