We thank participants of the IAREP conference 2000 in BAden, Austria, and two anonymous referees for helpful comments. Special thanks to Silke Meiner for implementing the experimental software.
THE EAST END, THE WEST END, AND KING'S CROSS: ON CLUSTERING IN THE FOUR-PLAYER HOTELLING GAME
Version of Record online: 26 MAR 2007
Volume 40, Issue 2, pages 231–240, April 2002
How to Cite
Huck, S., Müller, W. and Vriend, N. J. (2002), THE EAST END, THE WEST END, AND KING'S CROSS: ON CLUSTERING IN THE FOUR-PLAYER HOTELLING GAME. Economic Inquiry, 40: 231–240. doi: 10.1093/ei/40.2.231
- Issue online: 26 MAR 2007
- Version of Record online: 26 MAR 2007
We study experimentally a standard four-player Hotelling location game with a uniform density of consumers and inelastic demand. The pure strategy Nash equilibrium configuration consists of two firms located at one quarter of the “linear city,” and the other two at three quarters. We do not observe convergence to such an equilibrium. In our experimental data we find three clusters. Besides the direct proximity of the two equilibrium locations, this concerns the focal midpoint. Moreover, we observe that whereas this midpoint appears to become more notable over time, other focal points fade away. We explain how these observations are related to best-response dynamics, and to the fact that the players rely on best-responses in particular when they are close to the equilibrium configuration.