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Popularity in location games

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  • Fournier, Gaëtan
  • Schröder, Marc

Abstract

We study spatial competition between firms when consumer choices are not only influenced by their individual preferences but also by the popularity of firms. We fully characterize the subgame perfect equilibria, and show that the preference for popular goods enlarges the classical prediction: while minimal differentiation can still occur, the set of equilibria includes differentiated and asymmetric outcomes. We also show that the welfare impact of popularity is subtle: although the socially optimal outcome is a subgame perfect equilibrium when the popularity effect is strong, the price of anarchy, which measures the worst-case outcome, varies non-monotonically with the intensity of the popularity effect.

Suggested Citation

  • Fournier, Gaëtan & Schröder, Marc, 2026. "Popularity in location games," Journal of Mathematical Economics, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:mateco:v:124:y:2026:i:c:s0304406826000273
    DOI: 10.1016/j.jmateco.2026.103239
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