Question: Spatial Equilibrium (Note that the spatial equilibrium is also a Nash Equilibrium. Each vendor tries to get the maximum number of customers. Given : There

Spatial Equilibrium

(Note that the spatial equilibrium is also a Nash Equilibrium. Each vendor tries to get the maximum number of customers.

Given:

There are two ice cream vendors on a linear beach of 10 yards long.

Consumers are evenly distributed along the beach, located at the end points and spaced 3 feet apart.

Production costs are zero.

Both vendors sell ice cream for $2.00

Consumers walk to the closest vendor to buy ice cream.

The cost to consumers of travel to the vendor is 1 cents per yard (money

equivalent of consumer's time). Note that one-yard equals to 3 feet.

Question:

What are the profit maximizing equilibrium locations for two vendors?

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