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More Firms in Hotelling's "Stability in Competition"

Working paper #E95-50, First version November 1995, last modified 30 March 1998, comments are welcome, do not quote.

Anthony E. Dziepak*

Department of Economics, 3016 Pamplin Hall
Virginia Polytechnic Institute and State University
Blacksburg, VA 24061-0316 USA

Dziepak "at" vt "dot" edu

Abstract: This paper shows that the set of pure strategies equilibria is the complete set of equilibria in the two stage game of location and price, for three or more firms in circular space. That is, unlike the unit line, mixed strategies don't exist in the two stage game because a firm can improve its payoff by moving to another location.

* I am grateful to Amoz Kats for comments and Anya McGuirk and Saruhan Ozel for assistance.

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