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Mixed equilibrium in a pure location game: the case of n ≥ 4 firms


Ewerhart, Christian (2014). Mixed equilibrium in a pure location game: the case of n ≥ 4 firms. Working paper series / Department of Economics 168, University of Zurich.

Abstract

The Hotelling game of pure location allows interpretations in spatial competition, political theory, and professional forecasting. In this paper, the doubly symmetric mixed-strategy equilibrium for n ≥ 4 firms is characterized as the solution of a well-behaved boundary value problem. The analysis suggests that, in contrast to the cases n = 3 and n → ∞ , the equilibrium for a finite number of n ≥ 4 firms tends to overrepresent locations at the periphery of its support interval. Moreover, in the class of examples considered, an increase in the number of firms universally leads to a wider range of location choices and to a more dispersed distribution of individual locations. The results are used to comment on the potential benefit of competition in forecasting markets.

Abstract

The Hotelling game of pure location allows interpretations in spatial competition, political theory, and professional forecasting. In this paper, the doubly symmetric mixed-strategy equilibrium for n ≥ 4 firms is characterized as the solution of a well-behaved boundary value problem. The analysis suggests that, in contrast to the cases n = 3 and n → ∞ , the equilibrium for a finite number of n ≥ 4 firms tends to overrepresent locations at the periphery of its support interval. Moreover, in the class of examples considered, an increase in the number of firms universally leads to a wider range of location choices and to a more dispersed distribution of individual locations. The results are used to comment on the potential benefit of competition in forecasting markets.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C72, D43, D72, L13
Uncontrolled Keywords:Location, Hotelling game, mixed-strategy equilibrium, boundary value problem
Language:English
Date:July 2014
Deposited On:23 Jul 2014 10:47
Last Modified:14 Feb 2018 21:23
Series Name:Working paper series / Department of Economics
Number of Pages:21
ISSN:1664-7041
OA Status:Green
Official URL:http://www.econ.uzh.ch/static/wp/econwp168.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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