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Why do competing gas stations 
locate themselves next to one another?
Game Theory 101
Commonly referred to as “Hotelling” or Median Voter Theorem.
When competing on location
Everyone wants the central location.
|—————|—————|
locate themselves next to one another?Game Theory 101
Commonly referred to as “Hotelling” or Median Voter Theorem.
When competing on location
Everyone wants the central location.
|—————|—————|
You can assume that customers are uniformly distributed across.
Customers will go to the vendor closest to them, assuming all things equal.
To maximize their customers, it is in the best interest to position themselves in this fashion, otherwise they will lose customers.
Customers will go to the vendor closest to them, assuming all things equal.
To maximize their customers, it is in the best interest to position themselves in this fashion, otherwise they will lose customers.
This plays out well when you have two players:
Think:
- gas stations
- fast food
- Presidential election
Bit more complicated when there is an odd number of players.
If you enjoyed this, RT and let me know if you want an example of odd players.
Think:
- gas stations
- fast food
- Presidential election
Bit more complicated when there is an odd number of players.
If you enjoyed this, RT and let me know if you want an example of odd players.
