Two independent ice cream vendors own stands at either end of a 2 mile long beach....

Two independent ice cream vendors own stands at either end of a 2 mile long beach. Everyday there are 200 beach-goers who come to the beach and distribute themselves uniformly along the water. Every beach-goer one wants exactly one ice cream during the day, and values the ice cream from both stands at $5. All of the beach-goers would rather be sunbathing or in the water, so they have a disutility to walking on the beach of $1 per mile.

Early’s Ice Cream, the firm at location 0, is an early riser and always posts his price first. Cali Creamery, at location 2, is more laid back and posts her price just before the beach opens (the beach requires all prices be posted by the time the beach opens). Both firms have a marginal cost of zero.

1. Each individual is also referenced by a location x on the beach between 0 and 2. What are the utilities of purchasing from Early’s and Cali for the person at location .75, given that Early’s names price pe and Cali names price pc? What are the utilities for each individual as a function of their location on the beach, x?

2. What is the demand for Early’s Ice Cream and Cali Creamery given the firms name prices pe and pc?

3. What is Cali Creamery’s best response function when Early’s posts a price of pe?

4. What is the Stackleberg equilibrium outcome for this market? Report prices, quantities, and profits for each firm.

5. Early’s owner feels that his hard work is not paying off, he hires you as a business consultant. He’s annoyed that Cali is always undercutting his price and is considering waiting to post so that Cali will not learn his price before naming her own. He wants you to predict how waiting to post his price will affect his profits. What will Early’s profits be under this new regime? What advice do you give him?

Expert Solution

Rahul Sunny answered 2 years ago

Alpedo is considering opening stalls to sell ice cream on the 1KM long beach. It is...

Alpedo is considering opening stalls to sell ice cream on the 1KM long beach. It is estimated that there are 1000 sunbathers evenly spread along the beach and that each sunbather will buy one ice cream provided that they are priced at no more than $5. The effort of getting up from the sand to get an ice cream and return to the sun-bed is estimated at $0.5 for every 100m the sunbather is from a stall. Each ice cream...

2.- Assume that consumers are uniformly distributed along a one-mile stretch of a beach. N ice...

2.- Assume that consumers are uniformly distributed along a one-mile stretch of a beach. N ice cream vendors are pondering where to position their carts. The price that they are allowed to charge is fixed by the EACAC (Equal Access to Coolness for All Coalition). (Also, each consumer will buy exactly one ice cream.) Consumers incur some transportation cost of t dollars per mile when they move along the beach. (a) Show that there is no equilibrium (in locations) if...

In a 1000 feet length of the beach, there are 1,000 consumers uniformly distributed. Two ice-cream...

In a 1000 feet length of the beach, there are 1,000 consumers uniformly distributed. Two ice-cream shops want to enter this beach and sell ice-cream with a price p =100. All consumers demand one ice-cream at the nearest shop, and a consumer who is located t feet away from the shop obtains utility u = 1100 - p - t. Assume that ice-cream shops can produce and sell without any cost. a. Suppose two ice-cream shops can choose their locations...

Joseph Biggs owns his own ice cream truck an drives 30 miles from a florida beach...

Joseph Biggs owns his own ice cream truck an drives 30 miles from a florida beach resort. The sale of his products is higly dependent oh his location and on the weather. At the resort, his profit will be $120 per day in fair weather, $10 per day in bad weather. At home, his profit will be $70 in fair weather and $55 in bad weather. Assume that on any particular day, the weather service suggests a 40% chance of...

Jilly sells ice cream at the beach. You have determined that demand can be described by...

Jilly sells ice cream at the beach. You have determined that demand can be described by the following demand equation: Q = 1,200 - 200P. a. If P = $3.00, determine the number of ice cream sold and the elasticity of demand at this price. b. If price is increased to $4.00, determine the elasticity of demand at this new price. Is demand more or less elastic after the price increase?

Imagine that you own an ice cream parlor: What is a variable factor of your ice...

Imagine that you own an ice cream parlor: What is a variable factor of your ice cream parlor that must be modified or changed to increase the number of ice cream cones in the short run? What aspects of your business cannot be changed in the short run? Explain why only certain aspects of your business can change output in the short run. Does producing more output than another business in the market necessarily mean having greater economic profit (total...

IcyPop Inc. is an ice cream manufacturing company. It produces two major types of ice-cream products:...

IcyPop Inc. is an ice cream manufacturing company. It produces two major types of ice-cream products: FruityGo and BerryWafers. You have been brought on as an Analyst, with your first task being to ascertain the most appropriate method of assigning overhead costs to its FruityGo and BerryWafers products. The following information relates to these products for the year just ended for its two main production departments. Mixing Packaging Budgeted Overhead $400,000 $80,000 Budgeted Direct Labour Hours: FruityGo 1,000 5,000 BerryWafers...

2. Suppose a large size chocolate fudge ice cream gives 162 Calories. If an ice cream...

2. Suppose a large size chocolate fudge ice cream gives 162 Calories. If an ice cream contains 6.00 g of carbohydrate and 12.0 g of protein then find out grams of fat? [1g Fat = 9kcal, 1g Protein = 4kcal, and 1g Carbohydrate = 4kcal]

Ocean City is a vacation beach community one mile long, with all of its 1,000 daily...

Ocean City is a vacation beach community one mile long, with all of its 1,000 daily vacationers evenly distributed along the beach and boardwalk. At each end of the boardwalk is an urgent care clinic specializing in the treatment of jellyfish stings. The clinic on the south end of the boardwalk is Clinic S and the one on the north end of the boardwalk is Clinic N. On any given day, there is a 10% chance of being stung by...

A. Ben Cohen and Jerry Greenfield originally made ice cream in the back of their own...

A. Ben Cohen and Jerry Greenfield originally made ice cream in the back of their own shop. Later they expanded their business into a stock exchange traded corporation and built a factory that produced 240,000 pints per day. What happened to their own ownership when they expanded and built the brand’s first mass production factory? B. Many years after their successful expansion, Ben Cohen and Jerry Greenfield were forced, against their will, to sell all of their ownership rights to...

Question