Suppose we have a Hotelling model with N = 150 people who consider the good very valuable at V = $1000 so all consumers will buy from one store or the other, transport costs are t = $25 a mile. We have two competing firms at opposite ends of the road. Firm 2 is located at 0 and firm 2 at 1. Let marginal cost of production be $3. show that: D1= 150(p2 - p1 + $25)/50 Profit1= 3(p1 - 3)(p2 - p1 + 25)
Suppose we have a Hotelling model with N = 150 people who consider the good very valuable at V = $1000 so all consumers will buy from one store or the other, transport costs are t = $25 a mile. We have two competing firms at opposite ends of the road. Firm 2 is located at 0 and firm 2 at 1. Let marginal cost of production be $3. show that: D1= 150(p2 - p1 + $25)/50 Profit1= 3(p1 - 3)(p2 - p1 + 25)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose we have a Hotelling model with N = 150 people who consider the good very valuable at V = $1000 so all consumers will buy from one store or the other, transport costs are t = $25 a mile. We have two competing firms at opposite ends of the road. Firm 2 is located at 0 and firm 2 at 1. Let marginal cost of production be $3.
show that:
D1= 150(p2 - p1 + $25)/50
Profit1= 3(p1 - 3)(p2 - p1 + 25)
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