Publications [#267428] of David B. Ridley

Journal Articles

1. Ridley, DB, Herding versus Hotelling: Market entry with costly information, Journal of Economics and Management Strategy, vol. 17 no. 3 (September, 2008), pp. 607-631, WILEY, ISSN 1058-6407 [doi]
   (last updated on 2026/01/14)

   Abstract:
   Why do businesses such as fast-food restaurants, coffee shops, and hotels cluster? In the classic analysis of Hotelling, firms cluster to attract consumers who have travel costs. We present an alternative model where firms cluster because one firm is free riding on another firm's information about market demand. One consequence of this free riding is that an informed firm might forego a market that it knows to be profitable. Furthermore, an uninformed firm might earn higher profits when research costs are high, because it can credibly commit to ignorance. © 2008 Wiley Periodicals, Inc.