•Hotelling’stheory seems neither inspired nor driven by empirical data •It tries to explain some existing phenomena, but no systematic survey is done Problems •Shouldn‘t science usually be empirically driven? Put every voter on a line, from right to left; candidates move towards the center. With a little bit of detail added, this model, due to Hotelling, helps clarify the strategic nature of our electoral game. Economics helps explain disarray in politics, at least politics US-style. A short video explaining Hotelling's Law. Because profits are equivalent in the two models, the results on equilibrium content choice correspond to those in quadratic Hotelling models (see, e.g., d’Aspremont et al., 1979).In particular, if α and β are restricted to be positive, firms in a two-stage location-cum-price game choose maximal differentiation in equilibrium. Salop’s circular city model is a variant of the Hotelling’s linear city model.Developed by Steven C. Salop in his article “Monopolistic Competition with Outside Goods”, 1979, this locational model is similar to its predecessor´s, but introduces two main differences: firms are located in a circle instead of a line and consumers are allowed to choose a second commodity. A Hotelling Model of the EU ETS Our partial equilibrium model of the EU ETS builds on the model from Bocklet et al. Assumptions: Lancaster’s model is based upon the following main assumptions: 2. (2019) who use a discrete-time version of the model set up by Rubin (1996). 1 Spatial Competition 1.1 The linear city (Hotelling, 1929) • Linear city of length 1. • Duopoly with same physical good. competition’ (1929). The paper finds that while the Hotelling theory had contributed to the economics of nonrenewable resources and the rise of the conservationism movement, the assumptions laid out by the theory are not applicable to the real world. He discussed the characteristic- based model of product differentiation on the basis of which the existence of intra-industry trade could be explained. Why are gas stations always built close together? Hotelling’s Law explains why retailers and restaurants so often locate near one another. Hotelling’s Law is also referred to as the principle of minimum differentiation or Hotelling’s linear city model. The paper presents a model of the Hotelling rule and examines its applicability to real life phenomena. In the following we briefly outline the decision making of a representative firm in a perfectly competitive allowance market. The structure of models referred as Neo- Hotelling models rests upon the approach suggested by K.J. • They consume either 0 or 1 unit of the good. Suppose further that there are 100 customers located at even intervals along this beach, and that a customer will buy only from the closest vendor. Lancaster. • Consumers are distributed uniformly along the city, N =1 • Quadratic transportation costs t per unit of length. Why do competing politicians often hold similar views? • If locations are given, what is the NE in price? Hotelling's Model Suppose that two owners of refreshment stands, George and Henry, are trying to decide where to locate along a stretch of beach. Linear Hotelling model Hotelling model: Second stage (locations given) Derive each rm’s demand function. 29/10/2018 Hotelling's Model 22 All consumers to left !store 1; all consumers to right !store 2. The Hotelling–Downs model of Two–Party Competition and the Median Voter Theory My favourite topic from Public Choice is the Hotelling-Downs model of Two-Party Competition (Though it was never actually covered). 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