The residents of Guildford live on High Street, which is the only road in the town.

Two residents decide to set up general stores. Each can locate at any point

between the beginning of High Street, which we will label 0, and the end, which

we will label 1. The two decide independently where to locate and they must

remain there forever (both can occupy the same location). There are 1000

residents evenly distributed along the street.

Each store will attract the customers who are closest to it and the stores will

share equally customers who are equidistant between the two stores. Thus, if

one store locates at point X and the second at point Y, such that > , then

the first will get a share + ( )/2 and the second will get a share (1 ) +

( )/2 of the customers each day. Each customer contributes 1 in profits

each day to the general store she visits.

1. Define the actions, pure strategies, and daily payoffs for this game. Explain

your methodology step by step.

2. Define and explain Nash equilibrium in pure strategies.