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Unformatted text preview: UNIVERSITY OF WISCONSIN Economics 101 Fall 2005 Wei Zhang Problem Set 11 (not to be turned in) Game Theory : A Simple Logic Game 1. This is a location game - use logic and common sense to look for a solution. You may find it helpful to work with others on this problem if you're having trouble. Perhaps thinking of this problem as a puzzle, and/or drawing a simple diagram will help. Two ice cream vendors are planning to sell their frosty snacks on a beach that is one mile long. Each vendor wants to sell as much ice cream as possible. Both vendors charge the same price and sell exactly the same kind of ice cream (Babcock of course!). The sand is quite hot, and hence beach-goers will buy ice cream from the closest vendor. Assume that the beach-goers are evenly distributed across the beach, and that they each buy only one ice cream cone. Where will the vendors locate their carts? (Find the Nash Equilibrium of this location game.) Hint: It may help to start with one idea of where they should locate, and then ask if either of...
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