Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Suppose that Jason and Chad each are thinking of opening up a diet coke stand on the fourth floor of this building. Suppose that
potential customers are evenly spaced on a distance that is normalized to 1. Customers will buy a diet coke from whichever
stand requires the least walking. If they are the same distance the customer will flip a coin. This is depicted below.
1/4
1/2
3/4
Suppose that Jason and Chad are simultaneously choosing the location of their stands, what is the Nash Equilibrium location?
a. One of them puts a stand at 3/4 and the other puts a stand at 1/4
b. Chad and Jason put their stands right next to each other at 1/2
c. One of them puts a stand at 0 and the other puts a stand at 1
d. There is no Nash Equilibrium
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Transcribed Image Text:Suppose that Jason and Chad each are thinking of opening up a diet coke stand on the fourth floor of this building. Suppose that potential customers are evenly spaced on a distance that is normalized to 1. Customers will buy a diet coke from whichever stand requires the least walking. If they are the same distance the customer will flip a coin. This is depicted below. 1/4 1/2 3/4 Suppose that Jason and Chad are simultaneously choosing the location of their stands, what is the Nash Equilibrium location? a. One of them puts a stand at 3/4 and the other puts a stand at 1/4 b. Chad and Jason put their stands right next to each other at 1/2 c. One of them puts a stand at 0 and the other puts a stand at 1 d. There is no Nash Equilibrium
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