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I studied this as part of my degree. It's mostly the ice cream vendors problem, where apparently the franchises would prefer to saturate a smaller area with com

I studied this as part of my degree. It's mostly the ice cream vendors problem, where apparently the franchises would prefer to saturate a smaller area with competitors than a larger area with no competition. It's probably an oversimplification but it is painfully evident when walking around metro areas of Japan.

majos 7y ago
Why would ice cream vendors want to all compete in the same place? It seems economically counter-intuitive.
- kynes 7y ago
  https://mindyourdecisions.com/blog/2008/03/25/game-theory-tuesdays-hotelling’s-game-or-why-gas-stations-have-competitors-nearby/ https://mindyourdecisions.com/blog/2008/03/25/game-theory-tu...
- george_kaplan 7y ago
  The Hoteling-Downs Model of Spatial Competition: http://www.sjsu.edu/faculty/watkins/downs.htm http://www.sjsu.edu/faculty/watkins/downs.htm https://www.youtube.com/watch?v=jILgxeNBK_8 https://www.youtube.com/watch?v=jILgxeNBK_8
- brazzy 7y ago
  Because if you operate near your competitor, you can take market share from him without losing the customers that are now farther away from you (because you are still closer to them than your competitor is, and their demand is inflexible).
  - deleted 7y ago
    [deleted]
  - logfromblammo 7y ago
    The same reason why the last Price is Right bidder will sometimes bid $1 more than the existing highest bid in the qualifying round.[0] It takes out one of the three other competitors, unless their guess was exactly correct. The first ice cream vendor sets up in the center of the boardwalk, to minimize walking distance to all available customers. The second vendor sets up immediately adjacent, to take half the customers, who will stop at the nearest cart instead of walking another 2m. The third vendor, sets up on the opposite side from the 2nd, and then the first loses all their customers. So the first relocates to the other side of the 2nd, and they lose all their customers. Then the 2nd relocates to the other side of the 3rd. The vendors should really cartelize, divide up exclusive territories, and collude to drive out newer competitors. But whenever the cartel breaks down, or none is active, the individual vendors are constantly trying to cut each others' throats by taking market share from the others. Each ice cream vendor cart needs a certain length of boardwalk territory to remain in business, so any two colluding vendors could force another to move by bracketing the target on either side. The game gets increasingly complex as you add more players, and more so when adding a second dimension, such that the vendors have a territory area, rather than a length. Secoma is pursuing a strategy of claiming territories too small to support a greedier store, such that 7-11 can't carve away pieces of it without destroying itself and making no gains, whereas 7-11 is pursuing a strategy of sacrificing some of its stores to destroy all of its competitor stores, so that the survivors can divide the secured territories amongst themselves. The game is like Go, but in real life. Instead of a grid on a board, the moves are putting a franchise store location down on a map. Pieces that are surrounded are removed. Scoring is by profit rather than by territory. [0] In the qualifying round of Price is Right, 4 contestants try to guess the retail price of an advertised product, as closely as possible, without bidding greater than the actual retail price. The winner is then allowed to play one of the prize-awarding games.

majos 7y ago

Why would ice cream vendors want to all compete in the same place? It seems economically counter-intuitive.

kynes 7y ago
https://mindyourdecisions.com/blog/2008/03/25/game-theory-tuesdays-hotelling’s-game-or-why-gas-stations-have-competitors-nearby/ https://mindyourdecisions.com/blog/2008/03/25/game-theory-tu...
george_kaplan 7y ago
The Hoteling-Downs Model of Spatial Competition: http://www.sjsu.edu/faculty/watkins/downs.htm http://www.sjsu.edu/faculty/watkins/downs.htm https://www.youtube.com/watch?v=jILgxeNBK_8 https://www.youtube.com/watch?v=jILgxeNBK_8
brazzy 7y ago
Because if you operate near your competitor, you can take market share from him without losing the customers that are now farther away from you (because you are still closer to them than your competitor is, and their demand is inflexible).
- deleted 7y ago
  [deleted]
- logfromblammo 7y ago
  The same reason why the last Price is Right bidder will sometimes bid $1 more than the existing highest bid in the qualifying round.[0] It takes out one of the three other competitors, unless their guess was exactly correct. The first ice cream vendor sets up in the center of the boardwalk, to minimize walking distance to all available customers. The second vendor sets up immediately adjacent, to take half the customers, who will stop at the nearest cart instead of walking another 2m. The third vendor, sets up on the opposite side from the 2nd, and then the first loses all their customers. So the first relocates to the other side of the 2nd, and they lose all their customers. Then the 2nd relocates to the other side of the 3rd. The vendors should really cartelize, divide up exclusive territories, and collude to drive out newer competitors. But whenever the cartel breaks down, or none is active, the individual vendors are constantly trying to cut each others' throats by taking market share from the others. Each ice cream vendor cart needs a certain length of boardwalk territory to remain in business, so any two colluding vendors could force another to move by bracketing the target on either side. The game gets increasingly complex as you add more players, and more so when adding a second dimension, such that the vendors have a territory area, rather than a length. Secoma is pursuing a strategy of claiming territories too small to support a greedier store, such that 7-11 can't carve away pieces of it without destroying itself and making no gains, whereas 7-11 is pursuing a strategy of sacrificing some of its stores to destroy all of its competitor stores, so that the survivors can divide the secured territories amongst themselves. The game is like Go, but in real life. Instead of a grid on a board, the moves are putting a franchise store location down on a map. Pieces that are surrounded are removed. Scoring is by profit rather than by territory. [0] In the qualifying round of Price is Right, 4 contestants try to guess the retail price of an advertised product, as closely as possible, without bidding greater than the actual retail price. The winner is then allowed to play one of the prize-awarding games.