Hotelling’s Game, or Why Gas Stations Have Competitors Nearby

Re:Hotelling’s Game, or Why Gas Stations Have Competitors Ne... by vacri on Wednesday July 27, 2011 @11:46PM (#2815302)

Game theory makes the mistake of assuming its the only variable. Another reason for clustering is the congregations of similar stores attract more business. Think of a shopping centre. Now take one of the clothes stores and stick it on a suburban street. It's generally going to do less well by itself because you have to know about it before you go - you have to decide to go to that shop, rather than just show up and see what's on offer, as it were.

Perhaps a better example: I'm about to go to Vietnam. Hoi An is "the city with all the tailors". Everyone says "spend a couple of days in Hoi An and get lots of clothes made up". Now, there are tailors all throughout Vietnam of course, but they cluster in Hoi An - and tourists specifically wait until they get there to purchase clothes.

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Re:Hotelling’s Game, or Why Gas Stations Have Competitors Ne... by ipince on Thursday July 28, 2011 @03:48AM (#2815816)

I don't think "game theory makes the mistake of assuming its the only variable". Just like economics, we are simply modeling reality in some (limited) way and gaining some insight and conclusions from analyzing that model. The fault is for someone to apply those conclusions to reality without considering the assumptions made in the model.

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Re:Hotelling’s Game, or Why Gas Stations Have Competitors Ne... by saurik on Thursday July 28, 2011 @12:17AM (#2815355)

While your explanation is generally interesting, and while I'm also not claiming that game theory is the only (or even the primary) variable in this situation, I feel the need to point out that one does not go from gas station to gas station and find that they came home with 30 gallons of gas after an accidental "shopping spree" at the gas mall.

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Re:Hotelling’s Game, or Why Gas Stations Have Competitors Ne... by vacri on Thursday July 28, 2011 @03:14AM (#2815751)

While that is true, if you have equidistant from you two locations, one with one station, and one with four, then all other things being equal, you're going to go to the location with four stations - more price competition, less likelihood of queueing and the like.

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Re:Hotelling’s Game, or Why Gas Stations Have Competitors Ne... by saurik on Thursday July 28, 2011 @03:18AM (#2815760)

Unfortunately, it could easily be the case that the mentioned price competition outweighs the value of increased traffic due to decreased queuing, given how incredibly small the margin on gas stations is (from what I've heard from friends that have managed them).

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