Location games with references

Gaëtan Fournier and Amaury Francou
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Amaury Francou: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: We study a class of location games where players want to attract as many resources as possible and pay a cost when deviating from an exogenous reference location. This class of games includes political competitions between policy-interested parties and firms' costly horizontal differentiation. We find that the introduction of reference locations simplifies the set of pure-strategy equilibrium to a unique candidate which has a strong property: at most four players, the two most-left and two most-right, deviate from their reference locations. We provide necessary and sufficient conditions for the candidate to be an equilibrium. We illustrate our results in particular cases including the duopoly competition where we moderate the principle of minimal differentiation.

Keywords: Location games; Spatial competition; Spatial voting theory; Costly product differentiation (search for similar items in EconPapers)
Date: 2023-11
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Published in Games and Economic Behavior, 2023, 142, pp.17-32. ⟨10.1016/j.geb.2023.07.012⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04241721

DOI: 10.1016/j.geb.2023.07.012

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