Solution for QID #2946: Consider a linear city of lengthLLin which the consumers are | StudyHelpMe

Consider a linear city of length LL in which the consumers are uniformly distributed. There are two firms located at the extremes of the linear city: firm 1 is located at the left-hand extreme, and firm 2 is located at the right-hand extreme. Assume that every consumer buys one unit of the product, that transportation cost are linear (tdtd, where dd is distance), and that marginal production costs are zero. Given their location, the firms engage in price competition: they set prices simultaneously as in the Bertrand Model. (A) Derive the demands faced by every firm. (B) Find the equation of the best response function of every firm. (C) Find the Bertrand-Nash equilibrium set of prices.