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Two dry cleaners are located on a street of length 1 [addresses are numbered from 0 to 1]. The marginal costs of dry cleaning are 0 for both firms. Firm 1 is located at .15, while firm 2 is located at .9. Customers are uniformly distributed along the block, and each customer purchases 1 unit of dry-cleaning services. The final price to a consumer is .p^=p+d where p is the price he pays to the dry cleaning store and d is the distance he has to travel to it. Determine the equilibrium prices charged by the two firms, and their equilibrium profit levels. If the firms do not make the same profit, verbally describe why this is the case.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M947131

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