(Monopoly in the Hotelling model). Consumers are distributed uniformly with unit density in the segment [0, 1] and have utility function U;=1-t|0-l₁-P₁, where li, p; are the location and price of firm i, and t < 1/2 is a disutility parameter. Firm 0 is located at lo = 0 and has constant marginal cost equal to 0. It has to decide which price to set. Find the (monopolistic) equilibrium price, and explain how this varies as t changes.

(Monopoly in the Hotelling model). Consumers are distributed uniformly with unit density in the segment [0, 1] and have utility function U;=1-t|0-l₁-P₁, where li, p; are the location and price of firm i, and t < 1/2 is a disutility parameter. Firm 0 is located at lo = 0 and has constant marginal cost equal to 0. It has to decide which price to set. Find the (monopolistic) equilibrium price, and explain how this varies as t changes.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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