Example: Location game in Hoteling competition - In a linear city, two firms first choose where to locate Li, ( i=1 or 2 ), then they choose prices (pi,i=1 or 2) for their product simultaneously. - Consumers are uniformly distributed in the linear city, transportation cost to each firm is quadradic, txLi2, where x is the consumer's location. - Marginal cost is 0 for both firms, no fixed cost - Consumers reservation price v>t, and the utility the consumer can obtain is: Ux=vpitxLi2ifshebuyfirmisproduct. - The subgame perfect Nash equilibrium is (?,?) Example: Location game in Hoteling competition - In a linear city, two firms first choose where to locate Li, ( i=1 or 2 ), then they choose prices (pi,i=1 or 2) for their product simultaneously. - Consumers are uniformly distributed in the linear city, transportation cost to each firm is quadradic, txLi2, where x is the consumer's location. - Marginal cost is 0 for both firms, no fixed cost - Consumers reservation price v>t, and the utility the consumer can obtain is: Ux=vpitxLi2ifshebuyfirmisproduct. - The subgame perfect Nash equilibrium is (?,?)