Agents playing Hotelling’s game: an agent-based approach to a game theoretic model

Eveline van Leeuwen*, Mark Lijesen

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


This paper combines game theory and agent-based modelling, two powerful tools that economists use to understand the behavior of economic agents. We construct an agent-based version of Hotelling’s two-stage game of spatial competition and explore the possibilities of creating synergies between the two approaches. Game theoretic insights into strategic behavior and equilibrium states can provide useful theoretic underpinnings for agent-based approaches in regional science. By combining the two, we can model micro-based social order as it emerges out of local interactions. The use of agent-based modelling in the context of a multistage game is new and hence provides a valuable contribution to both streams of the literature. We show that combining the two approaches is feasible, also in the context of a more complex two-stage game. The model correctly reproduces the analytical results and also allows for more complex situations. As an example, we show the effect of different levels of consumer tastes for variety in Main Street. The reconstruction of Hotelling’s model of spatial competition opens up a wide variety of possibilities for further extensions that can lead to a better understanding of the variations we observe in reality. For some extensions, the use of a single-stage model would probably be more feasible though.

Original languageEnglish
Pages (from-to)393-411
Number of pages19
JournalThe Annals of Regional Science
Issue number2/3
Early online date19 Oct 2015
Publication statusPublished - Nov 2016

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