In Autarka there are 7200 people who like to visit an amusement park. Each of these consumers wants to visit one park once. The consumers’ homes are evenly spaced across the island, and they each suffer a disutility of $20 for each kilometer they travel to reach an amusement park. With their current technology, it costs an amusement park $11 for each customer they host. At present, the equilibrium price for an amusement park ticket is $31, and each firm has a profit of $72,000. This market is best modeled as Hotelling competition. You should neglect fixed costs throughout your analysis.
Note: For the purposes of this assignment you should treat this market as a one-shot game. Do not consider repetition or associated phenomena such as collusion or predatory pricing.
Find the profit function for Bernice’s Wild Rides. You should assume that Bernice’s marginal cost is $11.