The Principle of Minimum Differentiation Revisited: Return of the Median Voter

Nobuyuki Hanaki, Emily Tanimura () and Nicolaas Vriend
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Emily Tanimura: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: We study a linear location model (Hotelling, 1929) in which n (with n ≥ 2) boundedly rational players follow (noisy) myopic best-reply behavior. We show through numerical and mathematical analysis that such players spend almost all the time clustered together near the center, re-establishing Hotelling's " Principle of Minimum Differentiation " that had been discredited by equilibrium analyses. Thus, our analysis of the best-response dynamics shows that when considering e.g. market dynamics as well as their policy and welfare implications, it may be important to look beyond equilibrium analyses

Keywords: Stochastic stability; Best-response dynamics; Invariant measures; Hotelling location model; Principle of Minimum Differentiation; Nash equilibrium (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-bec, nep-gth and nep-ore
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Published in Journal of Economic Behavior and Organization, 2019, 157, pp.145-170. ⟨10.1016/j.jebo.2017.12.014⟩

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Related works:
Journal Article: The Principle of Minimum Differentiation revisited: Return of the median voter (2019)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2019)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter * (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter * (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01714582

DOI: 10.1016/j.jebo.2017.12.014

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