Question: Now, since both market makers submit at the same prices, price priority becomes irrelevant for ranking the priority of their limit orders. Time prior ity

Now, since both market makers submit at the same prices, \"price priority\" becomes irrelevant for ranking the priority of their limit orders. \"Time prior ity\" becomes important. When limit order submission becomes possible (the market opens), whoever can submit her limit orders before the other one will get priority. Suppose market maker 1 can invest into colocation: by spending $100, she can move her trading rm to be at the same location with the exchange. As a consequence, every day when trading market opens, her orders will be received 1 second earlier than the other market maker's orders. Will market maker 1 make this investment? Hint: please use protandloss calculations to support your conclusion. What would the daily trading prots be for market maker 1 if she does, or does not, make the investment? Does the dierence justify paying a one-time colocation investment cost of $100

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