Forget about the market demand assumptions laid out in question 1 and now assume that the Strip
Question:
Forget about the market demand assumptions laid out in question 1 and now assume that the Strip is one mile long with 10,000 over-the-top steak consumers distributed equally across the Strip. These consumers, who include the most notorious high-rollers in all of Las Vegas, will all go to the closest over-the-top steak purveyor and pay $1,100 per steak at a cost to either purveyor of $100 each. Having not considered the possibility of a competitor, the incumbent Mr. Bae opened his Vegas outpost of Nusr-et smack dab in the middle of the Strip (at .5). For now, assume that Salt Bae cannot move his Nusr-et outpost to another location on the Strip and cannot open an additional outpost.
a. If the fixed cost of entry is $4,000,000 and Dr. Diamond can open at most one establishment, where would he locate
b. If the fixed cost of entry is $4,000,000 and Dr. Diamond can open as many Diamond Steak Palace outposts as he would like, how many would he open and where would he locate them on the Strip
c. If Salt Bae had foreseen the potential entry of his new rival Dr. Diamond, how many outposts of Nusr-et should he have opened on the Strip, and where should he have located them
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba