'Signal-jamming' leads to 'minimum differentiation' under demand uncertainty

摘要

This paper analyzes the location equilibrium when three firms choose a location sequentially under demand uncertainty in spatial competition. If subsequently entering firms can predict new information concerning demand by observing the demand signal that arises after preceding firms enter the market, then the three firms choose the same location at the midpoint of the expected demand; this is known as "minimum differentiation." The reason for this is that preceding firms behave in a manner such that subsequent firms cannot predict the exact demand. This behavior of firms might present a new interpretation of "mimic behavior."