
but it is a negative externality on the B’s. The subsequent analysis picks up the narrative
with the simplification of neglecting integer constraints in the number of firms, but the
broad story is coherent with that just outlined, and extends it to more firms.
1.3.7 Multiple Stations
To analyze preference externalities in largermarkets with two taste groups and with multiple
stations of each type, we ignore the integer constraint, and first determine the equilibrium
numbers of firms of each type. There are two equations in two unknowns (n
w
and n
b
):
M
W
W
b
+ M
B
B
b
¼F
M
W
W
w
+ M
B
B
w
¼F,
which are the zero profit conditions for b and w stations respectively.