Initially the two vendors set up at the ¼ -mile mark and the ¾-mile mark in order for each to minimize its transportation costs. Eventually they both locate at the ½-mile mark. Which of the following statements is true?







a. Both vendors raised their transportation costs by moving to the center.

b. The initial setup is the Nash equilibrium.

c. The initial setup is a stable equilibrium.

d. Vendor A lowered its transportation costs by moving to the center.


a. Both vendors raised their transportation costs by moving to the center.

Economics

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