Q2 Hotelling Model

Just to clarify by X ABV I assume x is the numberofpercentage

Thatis forlightbeer ABV5 X 5
Torhea beer V x O1

w Ulow 10 x 5 Pe 15 x Pe

b unign 10 lo x Ph x Pa

c For a marginal consumer Mow Unigh

15 X Pe x Ph
2x 15 Pa Pe
xmcpe.ph 1stPgPe

pgP
d increases

AsPh increases XmPhPe

15
1P
Thelocationofthemarginal consumershiftsrightward
increases

Thatis moreconsumerswillbuythelightbeer ABV5 and lesswillbuytheheavy beer ABV10

e Demand
forlightbeer D 45 5 x go

75 5PhPe 50
25 5Pn 5Pa
Demand
forheavybeer Da 10
5k xgo

10075 5Pa 5Pa

25 5Ph 5Pa

f lightbeer Tue 25 512 5Pa Pe l

heavybeer Tun 25 5Pa 5Pa Pa D

g lightbeer my Tue 25 512 5Pa Pe l

Foc 391 25 51 top 5 0

lope 30 5Ph
BestResponsefunction Pe Ph 3 In

heavybeer Mpy Ton 25 5Pa 5Pe Pa 1

Foc 4Th 25 10Pa 5Pa 5 0

10Pa 30 514
BestResponseFunction PatPe 3 5Pe
h Pe 3 2Ph
fPa 3 IPe
Phy into weget Pe 3 It Pe

IPe I
PE 6
Pit 3 111 6
purestrategyNashEquilibriumprices are Pet Pit 6
The 253030716 1 125
Ton 253030716 1 125