3. Two vendors simultaneously choose a location. Then the customers choose the closest vendor to buy from. The profit for each vendor equals the number of customers that it attracted. Assume that the vendors choose a location from the set {1,2,3,4,5} of natural numbers, viewed as points on a real line, and that at each location there is exactly one customer. For example, for n = 5 there are 5 locations and when the players choose respectively the locations 2 and 5, their payoffs are u(2,5) = 3 and u2(2,5) = 2. When the vendors share a customer, for instance, when they choose respectively the locations 2 and 4, they end up with a fractional payoff, in this case u(2,4) : 2.5 and u2(2,4) 2.5. In general, each vendor's strategy set is Si = {1,2,3,4,5} for i 1, 2. The outcome of IESDS is
3. Two vendors simultaneously choose a location. Then the customers choose the closest vendor to buy from. The profit for each vendor equals the number of customers that it attracted. Assume that the vendors choose a location from the set {1,2,3,4,5} of natural numbers, viewed as points on a real line, and that at each location there is exactly one customer. For example, for n = 5 there are 5 locations and when the players choose respectively the locations 2 and 5, their payoffs are u(2,5) = 3 and u2(2,5) = 2. When the vendors share a customer, for instance, when they choose respectively the locations 2 and 4, they end up with a fractional payoff, in this case u(2,4) : 2.5 and u2(2,4) 2.5. In general, each vendor's strategy set is Si = {1,2,3,4,5} for i 1, 2. The outcome of IESDS is
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![3. Two vendors simultaneously choose a location. Then the customers choose the closest
vendor to buy from. The profit for each vendor equals the number of customers that it attracted.
Assume that the vendors choose a location from the set {1,2,3,4,5} of natural numbers, viewed
as points on a real line, and that at each location there is exactly one customer. For example,
for n = 5 there are 5 locations and when the players choose respectively the locations 2 and 5,
their payoffs are u(2,5) = 3 and u2(2,5)
= 2. When the vendors share a customer, for
%3D
instance, when they choose respectively the locations 2 and 4, they end up with a fractional
payoff, in this case u¡(2,4)
= 2.5 and uz(2,4)
= 2.5. In general, each vendor's strategy set is
Si = {1,2,3,4,5} for i
1, 2. The outcome of IESDS is
%3D
а. (1,5)
b. (2,4)
с. (3,3)
d. (4,4)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F468c164e-f785-47d0-b1fb-3738c0eafb83%2F524d6ef8-6bf5-4680-91bf-e3318cc03032%2Ffbglk9e_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3. Two vendors simultaneously choose a location. Then the customers choose the closest
vendor to buy from. The profit for each vendor equals the number of customers that it attracted.
Assume that the vendors choose a location from the set {1,2,3,4,5} of natural numbers, viewed
as points on a real line, and that at each location there is exactly one customer. For example,
for n = 5 there are 5 locations and when the players choose respectively the locations 2 and 5,
their payoffs are u(2,5) = 3 and u2(2,5)
= 2. When the vendors share a customer, for
%3D
instance, when they choose respectively the locations 2 and 4, they end up with a fractional
payoff, in this case u¡(2,4)
= 2.5 and uz(2,4)
= 2.5. In general, each vendor's strategy set is
Si = {1,2,3,4,5} for i
1, 2. The outcome of IESDS is
%3D
а. (1,5)
b. (2,4)
с. (3,3)
d. (4,4)
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