What is the combined total profit of firms

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Two Bertrand competitors sell identical products. Each firm is located at either end of a one-mile street. Both firms have marginal costs equal to 10 per unit and no fixed costs. There are 1000 consumers located evenly along the one-mile street who incur (there-and-back) travel costs of 5 per mile. Consumers share a common valuation of 20 for the product and purchase the product so long as this value exceeds the effective price (i.e. price plus travel costs).

Suppose the firms set prices sequentially (with firm 1 moving first), what is the combined total profit of both firms?

Reference no: EM133064375

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