Question 19 (2 points) Assume that total demand in a market is 1 and that customers...

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Question 19 (2 points) Assume that total demand in a market is 1 and that customers are uniformly spread across the line segment from 0 to 1. There are only two companies in the market and there is no cost or service advantage held be either Firm 1 or Firm 2. Firm 1 locates at point a, and Firm 2 locates at point 1-b as shown in the figure. A customer chooses one firm or the other solely on the basis of distance travelled. 0 a 1-b 1 If the two firms compete on price and the customer incurs transportation cost, it may be optimal for the two firms to locate at the point(s. If the two firms compete on price and the customer incurs transportation cost, it may be optimal for the two firms to locate at the point(s. 1) a = 0; b = 1 2) 3) 4) a = 1-3b; b = a = a = 1-a = 3 1-b 3; b= 1-3a 1 2; b 1 = 2 Question 19 (2 points) Assume that total demand in a market is 1 and that customers are uniformly spread across the line segment from 0 to 1. There are only two companies in the market and there is no cost or service advantage held be either Firm 1 or Firm 2. Firm 1 locates at point a, and Firm 2 locates at point 1-b as shown in the figure. A customer chooses one firm or the other solely on the basis of distance travelled. 0 a 1-b 1 If the two firms compete on price and the customer incurs transportation cost, it may be optimal for the two firms to locate at the point(s. If the two firms compete on price and the customer incurs transportation cost, it may be optimal for the two firms to locate at the point(s. 1) a = 0; b = 1 2) 3) 4) a = 1-3b; b = a = a = 1-a = 3 1-b 3; b= 1-3a 1 2; b 1 = 2