Question

2.4 Location choice Two soda vendors("pop" vendors, if you like) need to set up on the beach in the morning fog. There are 7 locations along the beach, equally spaced apart, labeled A, B, C, D, E, F, and G from north to south. The two vendors simultaneously choose their locations (they can't see each other until the fog lifts), and then operate from those locations for the entire day. A vendor earns $1 profit for each customer he or she serves. Each vendor wants to maximize profit. Each location along the beach has 10 customers. Each customer will patronize the closest vendor. In case the two vendors are equally close to a given location, each vendor will attract half of the customers in that location. Observe that a) What is Vendor I's best response function? b) Find all Nash equilibria.

Answer 1

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