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Location games with references

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  • Fournier, Gaëtan
  • Francou, Amaury

Abstract

We study a class of location games where players want to attract as many resources as possible and pay a cost when deviating from an exogenous reference location. This class of games includes political competitions between policy-interested parties and firms' costly horizontal differentiation. We find that the introduction of reference locations simplifies the set of pure-strategy equilibrium to a unique candidate which has a strong property: at most four players, the two most-left and two most-right, deviate from their reference locations. We provide necessary and sufficient conditions for the candidate to be an equilibrium. We illustrate our results in particular cases including the duopoly competition where we moderate the principle of minimal differentiation.

Suggested Citation

  • Fournier, Gaëtan & Francou, Amaury, 2023. "Location games with references," Games and Economic Behavior, Elsevier, vol. 142(C), pages 17-32.
    • Handle: RePEc:eee:gamebe:v:142:y:2023:i:c:p:17-32
    DOI: 10.1016/j.geb.2023.07.012
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    More about this item

    Keywords

    Location games; Spatial competition; Spatial voting theory; Costly product differentiation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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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