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The Principle of Minimum Differentiation revisited: Return of the median voter

Nobuyuki Hanaki (), Emily Tanimura and Nicolaas Vriend ()

Journal of Economic Behavior & Organization, 2019, vol. 157, issue C, 145-170

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: C72; D72; L13; R30 (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2018) Downloads
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016) Downloads
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016) Downloads
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016) Downloads
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016) Downloads
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016) Downloads
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