Two dry cleaners are located on a street of length

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Q. Two dry cleaners are located on a street of length 1 [addresses are numbered from 0 to 1]. The marginal costs of dry cleaning are 0 for both firms. Firm 1 is located at .15, while firm 2 is located at .9. Customers are uniformly distributed along the block, as well as each customer purchases 1 unit of dry-cleaning services. The final cost to a consumer is .p^=p+d where p is the cost he pays to the dry cleaning store as well as d is the distance he has to travel to it. Determine the equilibrium costs charged by the two firms, as well as their equilibrium profit levels. If the firms do not make the same profit, verbally describe why this is the case.

Reference no: EM137639

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