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(Solved): 2.Suppose consumers, each with unit demand, are uniformly distributed along a 1-mile street. Two pri ...



2.Suppose consumers, each with unit demand, are uniformly distributed along a 1-mile street. Two price-setting firms, 1 and 2, are located at each end of the street: firm 1 at 0 and firm 2 at 1. Consumers face a travel cost of £0.1 per mile. The marginal production cost of firm 1 is £0.5 and that of firm 2 is £1.5. Find out the reaction functions and equilibrium prices.



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