Hotelling in the Classroom

Nicolas Eber

Industrial Organization

Hotelling model

Non-computerized experiment

The purpose of the very simple classroom experiment we develop in this paper is precisely to present to students the key facets of the Hotelling model in a very intuitive yet comprehensive way. An interesting point is that the experiment actually allows one to deal with a priori purely technical issues such as the non-existence problem identified by d'Aspremont et al. (1979). The purpose of the experiment is thus to capture the whole story of spatial competition, including the clustering tendency by firms, price- competition problems, the demand-proximity effect, regulation aspects, and the political competition interpretation of spatial models.