Paper Info
Title
From Hotelling to Load Balancing: Approximation and the Principle of Minimum Differentiation.
Abstract
Competing firms tend to select similar locations for their stores. This phenomenon, called the principle of minimum differentiation, was captured by Hotelling with a landmark model of spatial competition but is still the object of an ongoing scientific debate. Although consistently observed in practice, many more realistic variants of Hotellingu0027s model fail to support minimum differentiation or do not have pure equilibria at all. In particular, it was recently proven for a generalized model which incorporates negative network externalities and which contains Hotellingu0027s model and classical selfish load balancing as special cases, that the unique equilibria do not adhere to minimum differentiation. Furthermore, it was shown that for a significant parameter range pure equilibria do not exist. We derive a sharp contrast to these previous results by investigating Hotellingu0027s model with negative network externalities from an entirely new angle: approximate pure subgame perfect equilibria. This approach allows us to prove analytically and via agent-based simulations that approximate equilibria having good approximation guarantees and that adhere to minimum differentiation exist for the full parameter range of the model. Moreover, we show that the obtained approximate equilibria have high social welfare.
Year
DOI
Venue
2019
10.5555/3306127.3331973
arXiv: Computer Science and Game Theory
Keywords
Field
DocType
Location Analysis,Facility Location Games,Approximate Pure Subgame Perfect Equilibria,Agent-based Simulation
Mathematical economics,Computer science,Load balancing (computing),Network effect,Subgame perfect equilibrium,Phenomenon,Distributed computing
Journal
Volume
Citations 
PageRank 
abs/1903.04265
0
0.34
References 
Authors
15
4
Name
Order
Citations
PageRank
Matthias Feldotto1145.50
Pascal Lenzner254.50
Louise Molitor314.08
Alexander Skopalik424720.62