The principle of minimum differentiation revisited: Return of the median voter

Arbeitspapier

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 the "Principle of Minimum Differentiation" that had been discredited by equilibrium analyses. Thus, our analysis of the best-response dynamics shows that when considering market dynamics as well as their policy and welfare implications, it may be important to look beyond equilibrium analyses.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 792

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Oligopoly and Other Imperfect Markets ; Real Estate Markets, Spatial Production Analysis, and Firm Location: General
• Subject: Hotelling location model ; Principle of Minimum Differentiation ; Nash equilibrium ; Best-response dynamics ; Stochastic stability ; Invariant measures

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hanaki, Nobuyuki ; Tanimura, Emily ; Vriend, Nicolaas J.
• Event: Veröffentlichung
• (who): Queen Mary University of London, School of Economics and Finance
• (where): London
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/175229
• Last update: 10.03.2025, 11:44 AM CET