The East End, the West End, and King's Cross: On Clustering in the Four-Player Hotelling Game
AbstractWe study experimentally a standard four-player Hotelling 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 mid-point. Moreover, we observe that whereas this mid-point 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.
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Bibliographic InfoPaper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 409.
Date of creation: Feb 2000
Date of revision:
Location model; Nonconvergence; Focal point; Best-response dynamics;
Other versions of this item:
- 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.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-21 (All new papers)
- NEP-EXP-2000-02-21 (Experimental Economics)
- NEP-GTH-2000-02-21 (Game Theory)
- NEP-IND-2000-02-21 (Industrial Organization)
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