Final entrant payoff in a discrete location game

ID: final-entrant-payoff-in-a-discrete-location-game

For , suppose two distinct occupied sites are , a final firm must choose a different site, customers have value two per site and nearest-firm ties are split equally. A final firm left of both incumbents maximizes its payoff uniquely at , when that site exists, obtaining . To the right it maximizes uniquely at , obtaining . At every available interior site it obtains the same payoff . Thus all best responses are obtained by comparing these three values, omitting regions with no available site and retaining every tied maximizing choice.
More generally, three distinct locations give their left, middle and right firms payoffs , and . Counting the two midpoint boundaries proves these formulas; the middle firm's demand is the difference between the cumulative demands at the two boundaries. The formulas retain all even/odd midpoint ties automatically.

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