
Hotelling's law - xoher
https://en.wikipedia.org/wiki/Hotelling%27s_law
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rbanffy
When Blockbuster Vídeo entered the Brazilian market, it seemed every store was
located less than one block away from the then current market leader, Hobby
Video. One hypothesis was that they bought the same market/demographic data.
The other is that Blockbuster never even needed that data - all they had to do
was to locate their stores based on Hobby Video's use of the demographic data.

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powertower
In the US it's the same exact story, except it's with McDonald's and Burger
King.

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jasode
There was (2012) a widely shared 4 minute cartoon about this topic:

[https://www.youtube.com/watch?v=jILgxeNBK_8](https://www.youtube.com/watch?v=jILgxeNBK_8)

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raymondgh
In the two shops on the street example, Hotelling's explains that while it
would better serve the customers to be each located one quarter distance from
each end of the street, but that neither shop would risk letting the
competitor relocate to capture more of the market.

Can this be expanded to mean that Hotelling's law allows for a third
competitor to approach an adjacent pair and simply steal all of the business
from one side of the street?

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fasteddie
Hotelling's law assumes businesses are mobile, which is why its often
characterized as a pushcart or ice cream truck. The business in the middle
would want to move to the other side of its neighbor, and the process would
repeat.

As such, there's no stable equilibrium in a three-firm Hotelling's law
problem.

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taurath
Does this explain the starbucks across from the starbucks?

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alister
Simplest explanation: the first Starbucks had enough business to justify a
store twice as large but didn't have room to expand. So they opened a second
store across the street.

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caw
It also has some other benefits, where you can service traffic coming from
different directions. When you drive on the highway and get off on an exit to
get gas, most of the time you'll stop at the one on your side of the road so
it's easier to get back on the highway. You also avoid having to make traffic
modifications to deal with the queue of cars trying to make a left into the
Starbucks.

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taurath
I have yet to see the "shell across from a shell" though. I wonder why?

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jerven
It happens but in some countries, e.g. the Netherlands, this is unlikely due
to the way fuel stop spots are actioned of next to the highway.

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whatshisface
Why can't one of the pharmacies open up a second store on the other side of
their competitor? Then instead of the service areas <-AB->, shop A could have
<-ABA->.

Presidential candidates and choices in the "I am thinking of a number between
one and ten" game can't expand to second locations, but businesses can. In
addition, if the pharmacy can't afford an expansion, a competitor could start
up and secure n-1 of B's traffic by being slightly rightmore.

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hammock
Then B opens another and you get ABAB. It's the same game

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wrboyce
I recently started reading a book called "The Joy of Game Theory: An
Introduction to Strategic Thinking" which touches on explaining the grouping
of similar shops (and politicians tending towards the centre!) as an effect of
Game Theory. Very interesting read so far.

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frik
Isn't it the same with software? Office suites, map-apps, email-apps, Android
(from different vendors), etc. try to more or less mimic the most successful
one.

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valarauca1
So TL;DR Competition breeds Conformity? Isn't that just another expression of
entropy?

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jamesfisher
Could you expand on this?

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valarauca1
Entropy is the idea that all information will become uniformly distributed.

In a market space given enough competition all products become similar.

These are statements of the same fact. Just instead of the universe we look at
a market space, time becomes competition, and feature set becomes entropy
count.

