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Spatial Competition with Three Firms: An Experimental Study

Collins, Richard and Sherstyuk, Katerina (1999) Spatial Competition with Three Firms: An Experimental Study. Social Science Working Paper, 1057. California Institute of Technology , Pasadena, CA. (Unpublished)

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The paper reports the results of an experimental study of the three firm location problem. We compare the subjects’ behavior in the experiments with the symmetric mixed strategy Nash equilibrium calculated by Shaked (1982). Overall, the findings are consistent with the equilibrium prediction. However, the subjects’ locations were significantly more dispersed than predicted by the theory. Three alternative explanations of this phenomenon - inexperience, approximate equilibrium behavior and risk aversion - are suggested and evaluated for their predictive power. Special attention is paid to risk aversion.

Item Type:Report or Paper (Working Paper)
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Additional Information:Please direct all correspondence to the second author (Sherstyuk). We are grateful to Peter Bardsley, Kim Border, Colin Camerer, Lisa Cameron, Richard McKelvey, Tom Palfrey, seminar participants at the Australian National University, Melbourne University and Caltech, an anonymous referee and the editor for helpful discussion. We also thank Joe Rasmussen and Andrew Read for their assistance in conducting the experiments. All errors are our own. Published as Collins, R., & Sherstyuk, K. (2000). Spatial competition with three firms: an experimental study. Economic Inquiry, 38(1), 73-94.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:1057
Classification Code:JEL: C9, C72, D43
Record Number:CaltechAUTHORS:20170810-162532912
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80264
Deposited By: Jacquelyn Bussone
Deposited On:10 Aug 2017 23:38
Last Modified:03 Oct 2019 18:29

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