There is a new pedestrian mall in downtown Nashville. It is one mile in length, and food
Question:
There is a new pedestrian mall in downtown Nashville. It is one mile in length, and food concessions are not allowed along the mall, only at the ends. A monopolist supplier of ice cream has a shop at either end of the mall. Each hot summer night, N = 4000 people, all hungry for ice cream, stroll the mall.
Shop 1 ------------------------------------------------------ Shop 2 0x 1
Assume that, when the mood for ice cream hits, consumers are evenly spread out along the mall. Each consumer wants only one cone, and is willing to pay a maximum of $6 for it. However, they also experience disutility from having to walk to get the cone, at the (round-trip) rate of $4 per mile of distance to the shop. Suppose that the monopolist’s marginal costs are constant and equal to $2 per cone.
(a) What is the highest price the monopolist can charge if he wants to serve all customers, and what profits will he make?
Business Logistics Supply Chain Management
ISBN: 978-0130661845
5th edition
Authors: Ronald H. Ballou