Consider the Hotelling model of the competition between two firms discussed in class. Select all that apply.If both firms are localized in position…

Consider the Hotelling model of the competition between two firms discussed in class. Select all that apply.

a.If both firms are localized in position 1/2 (i.e., center of the line), neither firm has incentives to deviate and move to a different position.

b.If Firm 1 and Firm 2 localize at the same point along the line, they will each sell to 50% of the consumers. 

c.If Firm 1 is located at position 1/2 (i.e., center of the line) and firm 2 is located somewhere else, then both firms have incentives to deviate and change their position along the line. 

d.In the Nash Equilibrium in pure strategies firms will localize together anywhere along the line.

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