From hotelling to load balancing: Approximation and the principle of minimum differentiation

Matthias Feldotto, Louise Molitor, Pascal Lenzner, Alexander Skopalik

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2 Citations (Scopus)
4 Downloads (Pure)

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 Hotelling's 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 Hotelling's 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 Hotelling's 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.

Original languageEnglish
Title of host publication18th International Conference on Autonomous Agents and Multiagent Systems, AAMAS 2019
PublisherThe International Foundation for Autonomous Agents and Multiagent Systems (IFAAMAS)
Pages1949-1951
Number of pages3
ISBN (Electronic)9781510892002
Publication statusPublished - 1 Oct 2019
Event18th International Conference on Autonomous Agents and Multiagent Systems, AAMAS 2019 - Montreal, Canada
Duration: 13 May 201917 May 2019
Conference number: 18
http://aamas2019.encs.concordia.ca/

Publication series

NameProceedings of the International Joint Conference on Autonomous Agents and Multiagent Systems, AAMAS
Volume4
ISSN (Print)1548-8403
ISSN (Electronic)1558-2914

Conference

Conference18th International Conference on Autonomous Agents and Multiagent Systems, AAMAS 2019
Abbreviated titleAAMAS
CountryCanada
CityMontreal
Period13/05/1917/05/19
Internet address

Keywords

  • Agent-based simulation
  • Approximate pure subgame perfect equilibria
  • Facility location games
  • Location analysis

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  • Cite this

    Feldotto, M., Molitor, L., Lenzner, P., & Skopalik, A. (2019). From hotelling to load balancing: Approximation and the principle of minimum differentiation. In 18th International Conference on Autonomous Agents and Multiagent Systems, AAMAS 2019 (pp. 1949-1951). (Proceedings of the International Joint Conference on Autonomous Agents and Multiagent Systems, AAMAS; Vol. 4). The International Foundation for Autonomous Agents and Multiagent Systems (IFAAMAS).