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Spatial Competition with Three Firms: An Experimental Study

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  • Collins, Richard
  • Sherstyuk, Katerina

Abstract

This article reports the results of an experimental study of the three firm location problem. We compare the subjects' behavior in the experiments with the symmetric mixed strategy Nash equilibrium calculated by Shaked. Overall, the findings are consistent with the equilibrium prediction. However, the subjects' locations were significantly more dispersed than predicted by the theory. Three alternative explanations of this phenomenon--inexperience, approximate equilibrium behavior and risk aversion--are suggested and evaluated for their predictive power. Special attention is paid to risk aversion. Copyright 2000 by Oxford University Press.
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Suggested Citation

  • Collins, Richard & Sherstyuk, Katerina, 1999. "Spatial Competition with Three Firms: An Experimental Study," Working Papers 1057, California Institute of Technology, Division of the Humanities and Social Sciences.
    • Handle: RePEc:clt:sswopa:1057
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    File URL: http://www.hss.caltech.edu/SSPapers/wp1057.pdf
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    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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