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The East End, the West End and King's Cross: On clustering in the four-player Hotelling game

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  • Huck, S.
  • Müller, W.

    (Tilburg University)

  • Vriend, N.J.

Abstract

We study experimentally a standard four-player Hotelling location game with a uniform density of consumers and inelastic demand. The pure strategy Nash equilibrium configuration consists of two firms located at one quarter of the "linear city, " and the other two at three quarters. We do not observe convergence to such an equilibrium. In our experimental data we find three clusters. Besides the direct proximity of the two equilibrium locations, this concerns the focal midpoint. Moreover, we observe that whereas this midpoint appears to become more notable over time, other focal points fade away. We explain how these observations are related to best-response dynamics, and to the fact that the players rely on best-responses in particular when they are close to the equilibrium configuration. Copyright 2002, Oxford University Press.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-112550.

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Date of creation: 2002
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Publication status: Published in Economic Inquiry (2002) v.40, p.231-240
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-112550

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Web page: http://www.tilburguniversity.edu/

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  1. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(1), pages 27-41, January.
  2. Collins, Richard & Sherstyuk, Katerina, 2000. "Spatial Competition with Three Firms: An Experimental Study," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 38(1), pages 73-94, January.
  3. Brown Kruse, Jamie & Schenk, David J., 2000. "Location, cooperation and communication: An experimental examination," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 18(1), pages 59-80, January.
  4. B.Curtis Eaton & Richard G. Lipsey, 1972. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Working Papers, Queen's University, Department of Economics 87, Queen's University, Department of Economics.
  5. Shaked, A, 1982. "Existence and Computation of Mixed Strategy Nash Equilibrium for 3-Firms Location Problem," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 31(1-2), pages 93-96, September.
  6. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(1), pages 1-26, January.
  7. Osborne, Martin J & Pitchik, Carolyn, 1986. "The Nature of Equilibrium in a Location Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 223-37, February.
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Cited by:
  1. Gaëtan Fournier & Marco Scarsini, 2014. "Hotelling Games on Networks: Efficiency of Equilibria," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00983085, HAL.
  2. Lisa R. Anderson & Beth A. Freeborn & Jessica Holmes & Mark Jeffreys & Dan Lass & Jack Soper, 2006. "Location, Location, Location! A Classroom Demonstration of the Hotelling Model," Working Papers, Department of Economics, College of William and Mary 44, Department of Economics, College of William and Mary, revised 05 Feb 2007.
  3. Christian Ewerhart, 2014. "Mixed equilibrium in a pure location game: the case of n ≥ 4 firms," ECON - Working Papers, Department of Economics - University of Zurich 168, Department of Economics - University of Zurich.
  4. Orzen, Henrik & Sefton, Martin, 2008. "An experiment on spatial price competition," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(3), pages 716-729, May.
  5. Camacho-Cuena, Eva & Garcia-Gallego, Aurora & Georgantzis, Nikolaos & Sabater-Grande, Gerardo, 2005. "Buyer-seller interaction in experimental spatial markets," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 35(2), pages 89-108, March.
  6. Barreda-Tarrazona, Iván & García-Gallego, Aurora & Georgantzís, Nikolaos & Andaluz-Funcia, Joaquín & Gil-Sanz, Agustín, 2011. "An experiment on spatial competition with endogenous pricing," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 29(1), pages 74-83, January.

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