Why do competitors open their stores next to one another? - Jac de Haan
TED-Ed3 HN recommenders · 2015–2025
7.4M views · explainer · evergreen · Uploaded 2012-10-01
A short animated TED-Ed lesson in which two competing ice cream vendors on a beach illustrate why rival shops cluster together. It introduces game theory and the Nash equilibrium through the Hotelling model.
HN people use it as a clear, quick explanation of Nash equilibrium and why competitors cluster.
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6 comments from Hacker News
I've only had a cursory introduction to Nash's work through brief flirtations with game theory, but this is the best explanation i've found so far on Nash's Equilibrium which i still remember vividly for highlighting why a "Socially Optimal Solution" is pretty rare in real life [1] (apologies in advance to the ted-talk averse). Has anyone got any other good pointers to examples of his work? P.S. Can anyone recommend A Beautiful Mind, i'm kinda put off by the description in here which makes it sound very hollywoodised [2]? [1] - [VIDEO] [2] - [LINK]
I'm thinking aloud and obviously taking a negative purist view here, but does anyone else wonder, if in 20-30 years, if civilisation has actually advanced any, if we'll look back at ads in the same way we now seem to be treating tobacco, sugar, alchol etc. etc. ie a poison, but in this case of the mind rather than the body [1] [2]? I mean all that mind bogglingly dark patterny/cynical gameplay we engage in everytime we watch one. And there's also all the negative, misery inducing, pressure when you realise, even if you sold the house and spent it all on plastic surgery you wouldn't be anywhere near as attractive or thin as the size zero model they've just tried to use to sell you the gadget you probably don't need, that you probably can't afford that was likely made by some "exploited" person from resources that probably aren't sustainable and then shipped halfway round the world. And then you go and buy it anyway and hate yourself for being gullible and buying something you probably can't afford... just so you can support some guy who's just doing his job but secretly hates himself for engaging in a zero-sum game with the rest of mankind and persuading you to buy something you... every time he sits down at his desk so he can buy his kids new ipads for christmas when they'd arguably be better off without anyway [3]. Another nash equilibrium in a world crying out for socially optimal solutions [4] or just an another inevitable inefficiency of capitalism [5]. I mean what ever h
Setting up shop directly next to your competitor is the best choice, i.e., Nash equilibrium. That's why all the gas stations and coffee shops cluster up instead of spreading out. For example, on a beach, you should expect 2 ice cream vendors to cluster in the exact middle rather than move closer to their respective territories. This video explains it perfectly: [VIDEO]
extrapolating a small sample size will probably produce unreliable results. also its possible that there are 3 sushi restaurants on the same street because of the Hotelling model of spatial location (good vid explaining that: [VIDEO] )
So, basically a Nash Equilibrium [1]. Am happy to mindlessly converge in most areas, leaving me free to focus on a single divergent opportunity. [1] [VIDEO]
Some of it might be a competition thing, where clustering is a Nash Equilibrium to prevent the other guy from taking unclaimed territory/customers. [VIDEO]