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Imagine a variation of the Hoteling model seen in class. On a road of length 1, there are 3 firms selling a uniform product. Firm
Imagine a variation of the Hoteling model seen in class. On a road of length 1, there are 3 firms selling a uniform product. Firm A is located at one end of the road (location 0). Firm B is located at the 1/4 mark and Firm C is located the end of the road (marker 1). Consumers are uniformly distributed on the road. Consumers' benefit from buying the product is V - P-d, where V is the valuation, P is the price paid and d is the distance a consumer travels to buy the product. Solve for the demands faced by each firms as a function of prices. Which firm face a more responsive demand? Explain. Imagine a variation of the Hoteling model seen in class. On a road of length 1, there are 3 firms selling a uniform product. Firm A is located at one end of the road (location 0). Firm B is located at the 1/4 mark and Firm C is located the end of the road (marker 1). Consumers are uniformly distributed on the road. Consumers' benefit from buying the product is V - P-d, where V is the valuation, P is the price paid and d is the distance a consumer travels to buy the product. Solve for the demands faced by each firms as a function of prices. Which firm face a more responsive demand? Explain
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