(a)  What is the value of x as a function of pF and pO?

(b)  What is the demand for tents at FNF, qFNF(pF,pO)?

(c) What is the demand for tents at OA, qOA(pO,pF)?

(d)  What is FNF’s profit as a function of pF and pO?  What is its best response function?

(e)  What is OA’s profit as a function of pO and pF?  What is its best response function?

(f)  Find the Bertrand‐Nash equilibrium prices pF BN and pO BN.

(g)  What is the location of the marginal consumer?  How much does this family pay for a tent (include all costs)?

(h)  What are the Bertrand‐Nash equilibrium profits for FNF and OA?

Idaho City, Ohio, is a town built along a strip of road that is 25 blocks long.  There are two sporting goods stores in town.  Fin‐N‐Feather (hereafter FNF) is located 7 blocks from the West end of town and Outdoor Adventures (hereafter OA) is located 10 blocks from the East end of town.  Both stores sell tents, and both stores have a constant marginal and average cost of $40 per tent.  Idaho City is a real camping town.  There are fifteen families on each block of Idaho City that are currently in the market for a new tent.  The maximum willingness to pay for a tent is $150.  In addition to the price at the store, each family bears a cost of $3 per block to transport the tent home.  If pF is the price of a tent at FNF and pO is the price of a tent at OA, then the marginal consumer is located at a distance x from the West end of town (see diagram below).

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a The value of x as a function of pF and pO is given by x pF pO 6 b The demand for tents at FNF qF... View the full answer