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

Re:Hotelling’s Game, or Why Gas Stations Have Competitors Ne... by 9999 on Thursday July 28, 2011 @01:56AM (#2815570)

I'm surprised your brief rebuttal is not floating higher, as I think it is a far superior explanation for the phenomenon. In rural areas where zoning laws do not account for clustering of services like gas stations and fast food restaurants, there are many other factors that can confound a game theory based solution to this sort of question (availability of utilities like communications, electricity and water for example).

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Re:Hotelling’s Game, or Why Gas Stations Have Competitors Ne... by wisty on Thursday July 28, 2011 @05:22AM (#2815980)

In China, shops try to open up near competitors. Most cities have an "electric bike street", where all the shops in an area are electric bike shops (or restaurants / convenience stores). Customers like choice, and hate to go to a place where they can't compare prices. That might be zoning (I can imagine Chinese authorities saying "OK, that street can sell product X), but I think it's also a long standing tradition.

Here, shops hate to be near competitors, and it's not unknown for them to lobby the local council over zoning infringements that their competitors are making. This is despite their competitors pulling in a lot of business. After all, shops will pay many times the rent to be in a mall, proximately because that's where the customers are, but ultimately because that's where the competition is.

OK, a small hamburger joint needs to worry if McDonalds sets up next door. But if another small hamburger joint sets up nearby, it will increase traffic. The "competition" isn't the guy next door. It's the guy next door, the food strip in the mall, and home-cooked food; and only the guy next door is pulling in foot-traffic to your area. But guess who most business owners will try to put out of business?

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