Have you ever noticed that you rarely see a gas station by itself? Instead multiple gas stations seem to be clustered close to each other. Wouldn’t it be better if they were more spread out?
Presh Talwalkar noticed this phenomenon and used game theory to explain why it’s a rational decision for the gas stations, even if it’s not the optimal choice for consumers. It’s worth reading his entire post to understand the nuances of the shortcomings of the explanation, the theory of location....