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Suppose 2 firms are found on the real line [0,1]. Firm 1 is located at a=.15, and Firm 2 is located at 1-b, where b=.15. Assume P1=P2=$10. Consumers face a distance cost of $2 per square unit of distance. What can you infer about the market share of each firm? Suppose Firm One lowers its price to $9, how does this change the market share? Further, suppose transportation costs increase to $5 per square unit of distance. How does this additional change alter the market shares of the two firms?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91232036

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