Consumers are located uniformly across thestreet, with their location ranging between 0and 1. There are two apple sellers in themarket (Seller 1 and Seller 2) who must decidewhere to locate their shops. Consumersprefers to travel a shorter distance to a seller:(i.e. if Seller 1 is located at 0.3 and Seller 2 islocated at 0.8, a consumer located at 0.5 willbuy ice cream from Seller 1). If both sellers arein the same location, they split the market. (a)Set-up a matrix for a game in which sellershave one of three options: (i) locating at 0, (ii)locating at 1/2, or (iii) locating at 1; and writedown the associated payoffs.

1.Location at 0: only the customers who are settled at 0 or .5 will make purchase.2. Location at .5:…

buy ice cream from Seller 1). If both sellers are in the same location, they split the market. (a) Set-up a matrix for a game in which sellers have one of three options: (i) locating at 0, (ii) locating at 1/2, or (iii) locating at 1; and write down the associated payoffs.

buy ice cream from Seller 1). If both sellers are in the same location, they split the market. (a) Set-up a matrix for a game in which sellers have one of three options: (i) locating at 0, (ii) locating at 1/2, or (iii) locating at 1; and write down the associated payoffs.

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

Consumers are located uniformly across the
street, with their location ranging between 0
and 1. There are two apple sellers in the
market (Seller 1 and Seller 2) who must decide
where to locate their shops. Consumers
prefers to travel a shorter distance to a seller:
(i.e. if Seller 1 is located at 0.3 and Seller 2 is
located at 0.8, a consumer located at 0.5 will
buy ice cream from Seller 1). If both sellers are
in the same location, they split the market. (a)
Set-up a matrix for a game in which sellers
have one of three options: (i) locating at 0, (ii)
locating at 1/2, or (iii) locating at 1; and write
down the associated payoffs.

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