What is the average and total transportation cost incurred by customers?

Hotelling Problem 9.) Government regulators require that aspirin be sold at drugstores for the price Show more Hotelling Problem 9.) Government regulators require that aspirin be sold at drugstores for the price P = 100 for the entire market. The cost of aspirin is 0. A continuum of customers of a total of one unit customer lie along Main Street denoted c [01]. Pharmacy 1 is located at 0.3 and Pharmacy 2 is located at 1. Everyone purchases one bottle of aspirin each time period as they value it at 250. Assume that the transportation cost across the entire street i.e. going from 0 to 1 is 40. 1. (a) Which customers will go to pharmacy 1? Which customers will go to pharmacy 2? 2. (b) What is the average and total transportation cost incurred by customers? (These are the same things in the model since there is a unit customer.) 3. (c) Jet.com decides to enter the aspirin market. It can deliver a bottle of aspirin for a delivery fee of 20 (per bottle) and charges 100 as the law requires. Which customers decide to purchase from Jet.com? Which customers still go to the pharmacy? What is the average price paid total in the town including the price for aspirin and the transportation or internet delivery fee? 10.) Firm 1 and Firm 2 sell hair dryers to customers in their Exclusive Hair Dryer Stores. The cost of these hairdryers from the supplier are C = 1. For whatever reason (not economics) firm 1 decides to charge P1=4 and firm 2 decides to charge P2=4.50. A continuum of customers of a total of one unit customer lie along Main Street denoted c [01]. Firm 1 is located at 0.3 and firm 2 is located at 0.8. It costs 10 to travel from point 0 to point 1. Customers value having one hairdryer per period and they value it at 20000. 1. (a) Which customers will get their hairdryer at firm 1? Firm 2? 2. (b) What is the average and total transportation cost incurred by customers? 3. (c) Amazon.com decides to enter the hair dryer business and offers customers hair dryers at cost (so the price is 1) with a shipping fee of 4. Which customers take up this offer? Show less

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