problem exactly identical to the Hotelling model we had in class) After opening, each pizza sho would have a marginal cost of $5 per pizza and no fixed costs a) Originally, both stores have plans to open on opposite ends of the street. What prices would be charged by each firm with such a location How much profit do the firms make per week with price competition in such a situation? b) b)what do you think would happen to the firms' prices if they located right next to each other? Would they want to do this? Part a is the standard Hotelling problem with t=10 For part b realize that only if firms locate away from each other do the firms get a local monopoly which allows them market power and they charge higher prices than marginal cost. Thus they would not want to locate next to each otherproblem exactly identical to the Hotelling model we had in class) After opening, each pizza shop would have a marginal cost of $5 per pizza and no fixed costs. a) Originally, both stores have plans to open on opposite ends of the street. What prices would be charged by each firm with such a location? How much profit do the firms make per week with price competition in such a situation? b) b) What do you think would happen to the firms’ prices if they located right next to each other? Would they want to do this? Part a is the standard Hotelling problem with t =10. For part b realize that only if firms locate away from each other do the firms get a local monopoly which allows them market power and they charge higher prices than marginal cost. Thus they would not want to locate next to each other