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The Principle of Minimum Differentiation Revisited: Return of the Median Voter

Author

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  • Nobuyuki Hanaki

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Emily Tanimura

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Nicolaas J Vriend

    (QMUL - School of Economics and Finance - QMUL - Queen Mary University of London)

Abstract

We study a linear location model (Hotelling, 1929) in which n (with n ≥ 2) boundedly rational players follow (noisy) myopic best-reply behavior. We show through numerical and mathematical analysis that such players spend almost all the time clustered together near the center, re-establishing Hotelling's " Principle of Minimum Differentiation " that had been discredited by equilibrium analyses. Thus, our analysis of the best-response dynamics shows that when considering e.g. market dynamics as well as their policy and welfare implications, it may be important to look beyond equilibrium analyses

Suggested Citation

  • Nobuyuki Hanaki & Emily Tanimura & Nicolaas J Vriend, 2019. "The Principle of Minimum Differentiation Revisited: Return of the Median Voter," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01714582, HAL.
    • Handle: RePEc:hal:cesptp:hal-01714582
    DOI: 10.1016/j.jebo.2017.12.014
    Note: View the original document on HAL open archive server: https://hal.science/hal-01714582
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    1. Martin J. Osborne, 1995. "Spatial Models of Political Competition under Plurality Rule: A Survey of Some Explanations of the Number of Candidates and the Positions They Take," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 261-301, May.
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    16. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
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    2. repec:spo:wpmain:info:hdl:2441/4cb1o2msej8cg9o9ip5ui05vqd is not listed on IDEAS
    3. Shuaicheng Liu, 2023. "Location choice with asymmetric data in the Hotelling model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 855-878, December.

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    More about this item

    Keywords

    Stochastic stability; Best-response dynamics; Invariant measures; Hotelling location model; Principle of Minimum Differentiation; Nash equilibrium;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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