Equilibrium in Hotelling's Model of Spatial Competition

Martin Osborne and Carolyn Pitchik

Econometrica, 1987, vol. 55, issue 4, 911-22

Abstract: A partly analytical, partly computational approach is used to study mixed strategy equilibria of Hotelling's model of sp atial competition in which each of two firms chooses a location in a line segment and a price. There is a unique (up to symmetry) subgame perfect equilibrium in which the locations choices are pure. In it, t he locations are close to the quartiles of the market, and the suppor t of the equilibrium mixed-price strategy of each firm is the union o f two short intervals. There is also a subgame perfect equilibrium in which the firms randomize over locations. Copyright 1987 by The Econometric Society.

Date: 1987
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Working Paper: Equilibrium in Hotelling's Model of Spatial Competition (1985)
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