Answer:
a. 2/3
Explanation:
The best response for second vendor is to locate at (1/3) position only because this way, it will be maximizing it's payoff
.
Because first vendor serves all customers to left of (1/3)
, It's market share is (1/3).
Now if second vendor locates at (1/3) , then it will get the entire market share to right hand side of (1/3) , which is (2/3) share.
Therefore, The best response for the second vendor is 2/3
