Equilibrium in Hotelling's Model of Spatial Competition
A partly analytical, partly computational approach is used to study mixed strategy equilibria of Hotelling's model of sp atial competition in which each of two firms chooses a location in a line segment and a price. There is a unique (up to symmetry) subgame perfect equilibrium in which the locations choices are pure. In it, t he locations are close to the quartiles of the market, and the suppor t of the equilibrium mixed-price strategy of each firm is the union o f two short intervals. There is also a subgame perfect equilibrium in which the firms randomize over locations. Copyright 1987 by The Econometric Society.
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Volume (Year): 55 (1987)
Issue (Month): 4 (July)
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- Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
- Paul R. Milgrom & Robert J. Weber, 1985.
"Distributional Strategies for Games with Incomplete Information,"
Mathematics of Operations Research,
INFORMS, vol. 10(4), pages 619-632, November.
- Paul Milgrom & Robert Weber, 1981. "Distributional Strategies for Games with Incomplete Information," Discussion Papers 428R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Gal-or, Esther, 1982. "Hotelling's spatial competition as a model of sales," Economics Letters, Elsevier, vol. 9(1), pages 1-6. Full references (including those not matched with items on IDEAS)
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