Assume That Total Demand in a Market Is 1 and That

question 1

Multiple Choice

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.

-The market share is maximized for both firms if they locate at the point(s)

• A)a = 1 - 3b;b = \(\frac { 1 - a } { 3 }\)
• B)a = ;b = 1 - 3a \(\frac { 1 - b } { 3 }\)
• C)a = 0;b = 1
• D)a = ;b = \(\frac { 1 } { 2 }\) \(\frac { 1 } { 2 }\)

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