We apply the farsighted stable set to two versions of Hotelling's location games: one with a linear market and another with a circular market. It is shown that there always exists a farsighted stable set in both games, which consists of location profiles that yield equal payoff to all players. This stable set contains location profiles that reflect minimum differentiation as well as those profiles that reflect local monopoly. These results are in contrast to those obtained in the literature that use some variant of Nash equilibrium. While this stable set is unique when the number of players is two, uniqueness no longer holds for both models when the number of players is at least three.
ASJC Scopus subject areas
- Sociology and Political Science
- Social Sciences(all)
- Statistics, Probability and Uncertainty