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

Nobuyuki Hanaki (), Emily Tanimura () and Nicolaas Vriend ()
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Emily Tanimura: Centre d'Economie de la Sorbonne, http://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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 the “Principle of Minimum Differentiation” that had been discredited by equilibrium analyses. Thus, our analysis of the best-response dynamics shows that when considering market dynamics as well as their policy and welfare implications, it may be important to look beyond equilibrium analyses

Keywords: Hotelling location model; Principle of Minimum Differentiation; Nash equilibrium; Best-response dynamics; Stochastic stability; Invariant measures (search for similar items in EconPapers)
JEL-codes: C72 D72 L13 R30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ore
Date: 2016-04
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ftp://mse.univ-paris1.fr/pub/mse/CES2016/16037.pdf (application/pdf)

Related works:
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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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:16037

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