1. In the hoteling's location model, consumers are uniformly distributed along the line

segment [0,1] and each consumer buys a scoop of ice cream. Suppose firm A is located

at 0 and charges price at P, while firm B is situated at 1 and charges price P*for a scoop

of ice cream. Furthermore, the transportation cost for each consumer is c per unit

length, and the marginal cost to making one scoop of ice cream for both firms is m.

a) Derive the demand function for firms A and based on the information

provided above. [5 marks]

b) Next, derive the profit of each firm bearing in mind that both firms are identical.

[5 marks]