Consider the horizontal differentiation model of “Linear City” the consumers are uni- formly distributed on the segment [0.1]. Consumers have a transport cost td where d is the distance traveled. All consumers have a valuation s and the marginal cost of producing the good is c. The fixed cost to open a store is f for every location.
a) How high would have to be s for a monopolist located at 1/2 decided to put a price at which all consumers are served?(All decide to eat).
b) If F = t and the monopolist must decide between one or two locations, how many locations 2
would it choose? What will be its profit?
Thanks in advance
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