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Published January 2000 | public
Journal Article

Spatial competition with three firms: an experimental study


This article 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. 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

Additional Information

© 2000 Wiley. We are grateful to Peter Bardsley, Kim Border, Colin Camerer, Lisa Cameron Charles Hyde 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.

Additional details

August 19, 2023
October 17, 2023