Location, Location, Location! A Classroom Demonstration of the Hotelling Model
Abstract
This paper outlines a classroom experiment that complements the standard theoretical discussion of Hotelling's (1929) spatial competition model. The exercise provides students with a deeper understanding of the intuition behind competitive clustering, resolving the Bertrand paradox, and product positioning. Students act as street vendors operating within a “linear city.” Each student chooses a location, taking into account the locations of competitors and the transportation costs of customers. Other treatments include choosing price given location and a two-stage model of location and price. The experiment can be implemented in any size class, with very little preparation. It is well-suited for courses in microeconomics, industrial organization, game theory, experimental economics, and public choice economics, and also can be incorporated into political science courses.Download Info
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Paper provided by Department of Economics, College of William and Mary in its series Working Papers with number 44.Length: 30 pages
Date of creation: 18 Sep 2006
Date of revision: 05 Feb 2007
Handle: RePEc:cwm:wpaper:44
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Web page: http://www.wm.edu/economics/
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Related research
Keywords: classroom experiment; location choice;Find related papers by JEL classification:
- A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
- NEP-EXP-2006-09-30 (Experimental Economics)
- NEP-GEO-2006-09-30 (Economic Geography)
- NEP-URE-2006-09-30 (Urban & Real Estate Economics)
References
References listed on IDEASPlease report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- B.Curtis Eaton & Richard G. Lipsey, 1972.
"The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition,"
Working Papers
87, Queen's University, Department of Economics.
- Eaton, B Curtis & Lipsey, Richard G, 1975. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Review of Economic Studies, Wiley Blackwell, vol. 42(1), pages 27-49, January.
- repec:wop:humbsf:2000-24 is not listed on IDEAS
- Steffen Huck & Wieland M�ller & Nicolaas J. Vriend, 2000.
"The East End, the West End, and King's Cross: On Clustering in the Four-Player Hotelling Game,"
Working Papers
409, Queen Mary, University of London, School of Economics and Finance.
- Steffen Huck & Wieland M¸ller, 2002. "The East End, the West End, and King's Cross: on Clustering in the Four-Player Hotelling Game," Economic Inquiry, Western Economic Association International, vol. 40(2), pages 231-240, April.
- Huck, Steffen & Müller, Wieland & Vriend, Nicolaas J., 2000. "The East End, the West End, and King's Cross: On clustering in the four-player hotelling game," SFB 373 Discussion Papers 2000,24, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Huck, S. & Müller, W. & Vriend, N.J., 2002. "The East End, the West End and King's Cross: On clustering in the four-player Hotelling game," Open Access publications from Tilburg University urn:nbn:nl:ui:12-112550, Tilburg University.
- Edward C. Prescott & Michael Visscher, 1977. "Sequential Location among Firms with Foresight," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 378-393, Autumn.
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
- Shaked, A, 1982. "Existence and Computation of Mixed Strategy Nash Equilibrium for 3-Firms Location Problem," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 93-96, September.
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