Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please solve a through d. Suppose two firms locate at the ends of a linear street i.e. firm 1 is located on the left end
Please solve a through d.
Suppose two firms locate at the ends of a linear street i.e. firm 1 is located on the left end (x=0) and firm 2 on the right end (x=1)). Consumers in the market are uniformly distributed along this line. Marginal Costs for each firm are given by G and 2, respectively. The 2 firms simultaneously set prices P and P2 respectively. Suppose consumer is utility for buying from any firm j is given by V 1(x; 1)2 Pj. Where V is sufficiently large so that every consumer buys from some firm. (a) Find the indifferent consumer in the market for buying from firm 1 or firm 2. (b) What is demand for each firm? (c) What are the best response functions for each firm? (d) What are equilibrium prices and profits for each firm? (C) How do prices and profits compare to the example from the lectureStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started