What price should Franklin-Ice-Cream choose to charge at shop F?

long. Show more Consider a linear city model where 100 customers are uniformly spread along the road of 1 mile long. Each customer purchases at most 1 scoop of ice cream. The villager who lives distance d away from the shop gets utility from eating ice cream. Consumer always buys from the closest shop and he will get utility of zero if he does not buy it. There are two shops A and B in this market. Assume that shops compete in price and marginal cost of making ice cream is zero for both shops. Suppose that shop A locates at and shop B locates at Now Penn-Ice-Cream buys out shop A and B. Thus Penn Ice Cream operates these two shops. Furthermore Franklin-Ice-Cream enters this market and builds a shop F at Xf = 0.7 (a) What is the location of the consumer who is indi erent between buying from shop A or shop F and shop F or shop B. Write down the profit functions for Penn-Ice-Cream and Franklin-Ice-Cream. (b) What price should Franklin-Ice-Cream choose to charge at shop F? Moreover what prices should Penn-Ice-Cream choose to charge at its two shops? (Price at shop A and Price at shop B can be di erent.) Show less

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