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

Nobuyuki Hanaki, Emily Tanimura and Nicolaas Vriend
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Emily Tanimura: Université Paris 1

No 792, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We study a linear location model (Hotelling, 1929) in which n (with n ≥ 2) boundedly rational players follow (noisy) myopic best-reply behaviour. 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)
Date: 2016-04-05
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Related works:
Journal Article: The Principle of Minimum Differentiation revisited: Return of the median voter (2019)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2019)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2019)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter * (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter * (2016)
Working Paper: The Principle of Minimum Differentiation Revisited: Return of the Median Voter (2016)
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