Question
Let there be two hair salons located on Main Street, which is one mile long. One is located at the east end of town, x
Let there be two hair salons located on Main Street, which is one mile long. One is located at the east end of town, x = 0, and the other is located at the east end, x = 1. There are 100 potential customers who live along the mile stretch, and they are uniformly spread out along the mile. Consumers are willing to pay $50 for a haircut done at their home. If a consumer has to travel there and back to get a haircut then a travel cost of $5 per mile is incurred. Each salon has the same unit cost equal to $10 per haircut. Suppose the East End Salon posts its price for a haircut first and then the West End Salon posts its price for a haircut. What prices will the two salons set? How many customers does each salon serve? What are the profits?
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