Question

Two firms, firm 1 & firm 2, find themselves situated in Hotelling Street, firm 1 at the very ... Two firms, firm 1 & firm 2, find themselves situated in Hotelling Street, firm 1 at the very beginning of the street and firm 2 at the very end of the street. There are N = 2,000 customers each buying 1 unit of the good from the firm with lower full price (for that customer), i.e., the price charged at the location (p1 or p2) plus transportation cost to get to that location. Full price = pi + t × (distance to firm i), where t is transportation cost per length of the street. Firm 1 has flat marginal cost MC1 = $10/unit (no fixed cost). Firm 2 has flat marginal cost MC2 = $15/unit (no fixed cost). Assume t = $4. The firms each maximize their own profits in a Bertrand duopoly. Find 11. Equilibrium quantity q2 firm 2 sells. 12. Equilibrium profit π1 firm 1 earns. 13. Equilibrium profit π2 firm 2 earns

Answer 1

Promm sooo The imtiffence consumer is determined by 000-) :) p」+ .nl-t : f 41000t-nt Q-P1. :) γ) .oo . 5 : 十 9,9- p,-P r6C 2

2. P, 6010 2s, P 4006S (750 ) (601045)-lo (750) 4,50 Ο, 18 7.5 = 지 : ㅈ2 (1250) ( 40065)-ts(12%): 4989, 37s