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.
There was (2012) a widely shared 4 minute cartoon about this topic:<p><a href="https://www.youtube.com/watch?v=jILgxeNBK_8" rel="nofollow">https://www.youtube.com/watch?v=jILgxeNBK_8</a>
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.<p>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?
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->.<p>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.
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.
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.