Having lots of similar businesses concentrated towards one direction might seem like a real big deal to buyers and often we ask for the reasons why this businesses do not just split up into different regions rather than concentrating themselves in one direction. In some regions like mine, there is an idea of the public market and almost everything one needs could be obtained from the public market, some of us have to walk extra miles or even take transportation in order to get to the public market I like to ask certain questions, why would some of these sellers not just split themselves to different regions instead of getting totally concentrated in one direction?
For instance, If I have to purchase cornflakes and there is no cornflakes spot close to my area, I have to walk down the street until I get to the public market to purchase the needed cornflakes and this does not happen to just me, few of my neighbours have to go through the same process of getting to the market where there are four to five cornflakes shop unlike my entire street where I cannot even find one.
I took the initiative to tell a woman I liked so much that she could just start a cornflakes business close to my street and all of us from that region will buy from her instead of having to face the numerous competition in the market, after giving her the advice she educated me on what she called ‘’Nash Equilibrium’’.
What is Nash Equilibrium?
(In economics and game theory) a stable state of a system involving the interaction of different participants, in which no participant can gain by a unilateral change of strategy if the strategies of the others remain unchanged. Definition from oxford dictionary
Carefully analysing what she considered a law or theorem, she gave me a clarification on the fact that very few of us came from my street to purchase cornflakes from the market, but different people from different streets go to the market to buy cornflakes.
It is also possible that some people who have a cornflakes seller in their street would even prefer to go to the market where they have several options to purchase from. According to her, the competition in the market might be tough and a little serious sometimes, but it is opened to different people from different locations. The average human will rather go to a place where he or she can obtain variety rather than a place where he or she will be limited to scarce commodities.
The next time you find certain congestion of businesses in the same region, just understand it might be the perfect marketable region for that product.
Further Reading
https://www.pnas.org/content/101/12/3999
https://www.quantamagazine.org/in-game-theory-no-clear-path-to-equilibrium-20170718/