We went shopping. Our son, who is 12 years old, noticed something during the trip.
Once we got back home, he asked:
Why Domino’s & Pizza Hut are next to each other everywhere?
That’s a good observation, I told him.
This is called as #NashEquilibrium named after the mathematician John Forbes Nash Jr.
In game theory, let us say, there are two players – Alice & Bob. They choose strategies A & B respectively. Then (A, B) is a Nash Equilibrium, where the players don’t have any other better strategy other than (A,B) that maximizes their pay-off in response to the other player. [credit: Wikipedia]
NE applies to a #zero-sum game whether there are two or more players. If you add up the profits of all players & subtract their total losses then it sums up to zero.
You don’t gain by changing your strategy in response to your competitor if they also don’t change theirs. On the contrary, you stand to lose if you change your strategy. The optimum level is discovered and each party sticks to the same strategy.
This is the reason you find,
KFC next to Taco bell [& Burger King & Mc Donald’s].
Pepperfry next to Urban Ladder.
Max Fashion is followed by Reliance Trends & Pantaloons.
Petrol bunks located next to each other.
Starbucks, Costa Coffee & Barista next to Coffee day.
Restaurants are grouped together.
Jewellery shops in the same location.
Silk Saree shops all lined up together.
You may want to watch a TED-Ed video titled “Why do competitors open their stores next to one another? – Jac de Haan” [https://www.youtube.com/watch?v=jILgxeNBK_8]
This is the reason you find Amazon’s “The Great Indian Festival” overlapping Flipkart’s “Big Billion Days”.
This is election season everywhere. Some countries have two players whereas we have multiple players, in India. 🙂
Find your Nash Equilibrium Vis-a- vis your competition!
#b2b #b2c #sales #innovation #entrepreneurship