1925Hotelling
Hotelling
Two ice cream men problem: Two merchants selling the same ice creamat the same fixed price p: Consumers are uniformly distributed alonga linear segment of length L Each consumer purchases one or zerounit of the good from the nearer firm. Theutility function of each consumer isu, if she consumes one ice creamLO, if she doesn' t consume
Two ice cream men problem • Two merchants selling the same ice cream at the same fixed price p • Consumers are uniformly distributed along a linear segment of length L • Each consumer purchases one or zero unit of the good from the nearer firm. The utility function of each consumer is = 0, if she doesn' t consume u, if she consumes one ice cream U
Two ice cream men problem: The unit transportation cost for consumersis t The boundary between the two firmsmarket areas is given by the location ofthe marginal consumerwho is indifferentbetween buying from either firm
Two ice cream men problem • The unit transportation cost for consumers is t • The boundary between the two firms’ market areas is given by the location of the marginal consumer who is indifferent between buying from either firm