The Missing Equilibria in Hotelling's Location Game

Arbeitspapier

We study the location equilibrium in Hotelling's model of spatial competition. As d'Aspremont et al. (1979) have shown, with quadratic consumer transportation cost the two sellers will seek to move as far away from each other as possible. This generates a coordination problem which the literature typically ignores by restricting firm 1 to locate in the first half and firm 2 in the second half of market. We study the non-cooperative outcome in the absence of such a coordination device and find that the location game possesses an infinity of mixed strategy Nash equilibria. in these equilibria coordination failure invalidates the principle of 'maximum differentiation' and firms may even locate at the same point.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 975

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Production, Pricing, and Market Structure; Size Distribution of Firms
• Subject: Spatialcompetition ; Hotelling's location model ; coordination games

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bester, Helmut
• Event: Veröffentlichung
• (who): Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
• (where): Evanston, IL
• (when): 1991

Further information

• Handle: http://hdl.handle.net/10419/221334
• Last update: 10.03.2025, 11:45 AM CET