  We study a variant of the Hotelling-Downs model of spatial competition
between firms where consumer choices are influenced by their individual
preferences as well as the popularity of the firms. In general, a multiplicity
of market equilibria might exist due to the popularity effect. To elucidate
firm decision-making, we explore three distinct behavioral attitudes towards
this multiplicity of equilibria: optimistic, neutral, and pessimistic. For each
behavior, we characterize the set of Nash equilibria and measure the impact of
the selfish behavior on the social welfare by means of the price of anarchy and
price of stability.
