Location Choice under Spillovers

Özgün Ekici and Bugra Caskurlu
Additional contact information
Bugra Caskurlu: TOBB ETU

Business and Economics Research Journal, 2022, vol. 13, issue 1, 1-9

Abstract: This paper introduces the location choice under spillovers game: A number of firms choose from among a number of alternative locations. A firm’s payoff at some location is the sum of two factors: Its location-specific idiosyncratic payoff; and the positive spillover it receives, which is a function of the number of firms choosing the same location. The spillover function is location-specific and monotonically increasing. This game form can be viewed as an extension of the classic “battle of sexes” game. It can also be used to model real-life game-theoretic situations with network effects, such as when app users choose from alternative social media or instant messaging apps. In our main result, we show that the location choice under spillovers game is a potential game, and hence, it always admits a Nash equilibrium in pure strategies. We also show that: A Nash equilibrium outcome need not be Pareto efficient. An outcome that is Pareto efficient need not be a Nash equilibrium. And a Nash equilibrium is not necessarily a strong equilibrium.

Keywords: Pure strategy Nash equilibrium; Existence; Potential Games; Location Choice; Spillovers; Network Externalities (search for similar items in EconPapers)
JEL-codes: C72 D62 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.berjournal.com/tr/location-choice-under-spillovers Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:0579

Access Statistics for this article

Business and Economics Research Journal is currently edited by Adem Anbar

More articles in Business and Economics Research Journal from Uludag University, Faculty of Economics and Administrative Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Adem Anbar (ademanbar@hotmail.com).