Reference no: EM131553638

Scenario

Two vendors, Ms. Bud and Ms. Weiser, operate on a beach. They are required to charge the same price, but they can choose where to locate themselves on the beach. Their customers, sunbathers, do not like to be near each other, so they are spread evenly along the beach. Sunbathers are also averse to walking, so they purchase one can of beer from the vendor closest to them.

Where on the beach will the vendors, seeking large sales, locate themselves?

Hint: If one vendor, say, Ms. Bud, had already chosen her location, where should her rival, Ms. Weiser, place herself? You might find it helpful to draw or sketch a picture of the beach or picture the beach setting in your mind. Who are the customers these two vendors are actually competing for? All the customers on the beach? The ones on their left/right? Only the ones between these two vendor locations?

Directions

Analyze the given situation (the scenario) from both vendor's perspective, and present either one solution or compare several possible solutions in your written answer. 

The logic of this game is quite subtle. Both players, calculating their best actions, must simultaneously conjecture what their rival is going to decide to do. The puzzles that the location game might resolve in business life include the following:

• Why do gas stations often cluster together?
• Why do different airlines flying a given route schedule simultaneous departures?
• Why do New York City street peddlers of watches and radios cluster on the same blocks?
• Why do competing television networks target their programs at bland, middle-of-the-road tastes?