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.
New Information:
Each ice cream vendor charges $2 for per cone.
Both vendors sell the same ice cream.
Question
What are the socially optimal locations that minimize aggregate travel costs & show on a line diagram?
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