When studying game theory, something that came to mind for me was gas stations. Gas stations are often found located next to each other, and I often wonder the reasoning for them to be located in such close proximity to their competition. There is no monopoly on gas, so gas stations must use their location and prices to create the maximum amount of customers. I found that there is a reason for them always being located in clusters, and this is the theory behind it. If there was a 90 mile stretch of highway, and two gas stations were spread equally throughout, one at 30 miles from the west entrance and the other 30 miles from the east entrance, there would be equal business for both, right? This is true, but one gas station could get greedy and move 50 miles in...or even 60 and be located next to the other gas station, thereby stealing some of their customers. So gas stations both assume the other will take advantage of them, and decide to share the middle ground, each receiving the same customers and, in theory, the same amount of business.
S. (n.d.). Hotelling's Game, or Why Gas Stations Have Competitors Nearby. Retrieved from