Spatial competition with three firms: An experimental study

This article reports the results of an experimental study of the three firm location problem. We compare the subjects' behavior in the experiments wit h the symmetric mixed strategy Nash equilibrium calculated by Shaked Overal l, the findings are consistent with the equilibrium prediction. However, th e subjects' locations were significantly more dispersed than predicted by t he theory. Three alternative explanations of this phenomenon-inexperience, approximate equilibrium behavior and risk aversion-are suggested and evalua ted for their predictive power. Special attention is paid to risk aversion. (JEL C9, C72, D43).