Question

Two street vendors (Vendor I and Vendor 2) with mobile carts produce the same good which they sell at the same price. Customers are located along a linear boardwalk with six locations (Location A through Location F), with a different number of customers in each location, as pictured below: 18 So, there are X customers in location A. 4 in B, 6 in C 2 in D, 8 in E and 18 in F. There are 38 X custmers total. Customers will make a purchase from whichever vendor is closest to them, and equally close customers will be split evenly between Vendor I and Vendor 2. The vendors CAN locate in the same location (so, both could locate in location A If X 12. where will Vendor I locate in equilibrium? a. A b. B d. D If X 12. where will Vendor 2 locate in equilibrium? a. A b. B c.C d. D What is the smallest value of X that would make (A. A) an equilibrium?

Answer 1

At equilibrium vendor 1 and 2 will locate at "D and E". At D vendor 1 will be serving all the consumers at his left that is A, B, C and D. And at E the second vendor will be serving all the consumers at his right that is E and F. At this point both the vendors will be serving 24 and 26 consumers respectively.