2. Assume consumers are uniformly distributed with density S (a measure of marketsize) on a circle with perimeter 1, and each consumer buys exactly one unit of thegood.Transport costs are linear: a consumer situated at distance x away from a firm incursa cost tx to go to that firm and return.Firms locate around the circle, each in one location, and produce the same physicalgood at the same unit cost c.There is a large number of potential entrants. Entry has a fixed cost of f. Assume thatN firms have entered and we are at stage 2. Since firms are symmetric, we look for asymmetric equilibrium where all firms set price p.a) Calcluate the total demand for a given firm i's product.b) Calculate the price that all firms will charge.

The Hotelling model, often referred to as the Hotelling's Law or the Hotelling-Downs Model, is a…

2. Assume consumers are uniformly distributed with density S (a measure of market size) on a circle with perimeter 1, and each consumer buys exactly one unit of the good. Transport costs are linear: a consumer situated at distance x away from a firm incurs a cost tx to go to that firm and return. Firms locate around the circle, each in one location, and produce the same physical

2. Assume consumers are uniformly distributed with density S (a measure of market size) on a circle with perimeter 1, and each consumer buys exactly one unit of the good. Transport costs are linear: a consumer situated at distance x away from a firm incurs a cost tx to go to that firm and return. Firms locate around the circle, each in one location, and produce the same physical

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2. Assume consumers are uniformly distributed with density S (a measure of market
size) on a circle with perimeter 1, and each consumer buys exactly one unit of the
good.
Transport costs are linear: a consumer situated at distance x away from a firm incurs
a cost tx to go to that firm and return.
Firms locate around the circle, each in one location, and produce the same physical
good at the same unit cost c.
There is a large number of potential entrants. Entry has a fixed cost of f. Assume that
N firms have entered and we are at stage 2. Since firms are symmetric, we look for a
symmetric equilibrium where all firms set price p.
a) Calcluate the total demand for a given firm i's product.
b) Calculate the price that all firms will charge.

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