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It seems like it'd be better to space them out, especially if you're the inferior business. They can't just get up and move like the ice cream scenario. Why do they do it that way?
Related question: why do big hardware stores, like Home Depot and Lowes, always seem to be next to each other? Same with Walmart, Target, and KMart. Same with gas stations. It seems like it'd be better to space them out, especially if you're the inferior business. They can't just get up and move like the ice cream scenario. Why do they do it that way?
While the walking distance is not optimal, there is an upside. The ice cream vendors will be driven to differentiate their ice cream lines, and the beach dwellers will be able to comparison shop without walking halfway across the beach.
What I am asking myself how this affects the computer science industry, i.e., in our business spatial-nearness is not necessary and for our customers superior technology is usually judgemental; any ideas?
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If only they developed an on-line store and a delivery mechanism. It would be the optimal solution from the customer perspective (price, feature and distance). Thanks in part to the ubiqutious internet.
You might be making a joke, but you also might have something here. If you can get GPS coordinates localized down to 5 meters, then you can have a mobile app that will let you place orders in places like public parks and on the beach. The app would look up vendors in the same location who are currently "open", and present virtual storefronts for them. The app would send the name, the precise GPS coordinates and, at t…
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There's no stable equilibrium. The ones on the edges are constantly incentivized to move towards the center, but at some point the guy in the middle is better off moving anywhere else. Kind of like the "divide the dollar" game.
I doubt that position is important if the 3 are directly adjacent one another, or at least not as important as say the appearance of your store front or your prices or your quality or your reputation or your display of well known logos .... If I walk all the way down the beach 3m further to get to a nicer looking icecream shop is nothing. Indeed I think I'd look at the price of the icecreams first, then the ones peop…
But what happens when there are three ice-cream sellers?
There's no stable equilibrium. The ones on the edges are constantly incentivized to move towards the center, but at some point the guy in the middle is better off moving anywhere else. Kind of like the "divide the dollar" game.
That said, the difference between a third ice cream cart and a 30th ice cream cart in the area is great. But then, the market should correct itself so that the optimal number of ice cream sellers are available.
Otherwise known as The Price is Right Asshole Bidding Theory: the same bid plus one.
There is a game theory course on itunes U that covers this more in depth during one of the first lectures - worth taking a look at if anyone is interested in delving deeper into this sort of thing.
Link?