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Comment by andylei | Hacker News Reader

>> One dangerous assumption in the hoteling model is that there are no costs to changing your position

location cost is not really necessary. think of this as a game that the ice cream sellers play before they locate. they figure, where do i place my hut to get the most business? it's at the center, no matter how many operators there are.

>> another unrealistic assumption: there are only two players

doesn't matter how many players there are. suppose there's one ice cream guy. where is he going to put his ice cream hut? in the center. let's say another one shows up. where is he going to put his hut? in the center. the logic repeats.

>> A third assumption is that it is a one dimensional world or that consumers judge choices only along one spectrum

yeah, this is a model for a perfectly competitive market. ice cream is a good example, as well as gas stations. this model is probably bad for products with lots of differentiation.

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>>> doesn't matter how many players there are. suppose there's one ice cream guy. where is he going to put his ice cream hut? in the center. let's say another one shows up. where is he going to put his hut? in the center. the logic repeats.

No it doesn't. With three sellers in the center, the one in the middle is close to very little people. He's in the worst possible spot and he'd better move anywhere else. So that's no longer a stable layout.

By the time you have walked half way along the beach to the icecream stalls, the distance between them will be negligible. If I walk up to three icecream stalls, I'll be right infront of three icecream stalls, so location won't matter.

I'm not sure how this aspect applies to the political senario, which is the more interesting one.

> I'm not sure how this aspect applies to the political senario, which is the more interesting one.

That's more difficult. For in most voting systems you have to take strategic voting into account. E.g. in a winner-takes-all systems people don't want to waste their votes, and thus the system tends towards two parties.

In politics what it usually means that while there can be advantages for two parties to tend towards the political centre, they always tend to keep enough distance between themselves to be clearly differentiated. The same logic still applies more or less - although the further towards the extremes the parties get, the larger the gap between them will tend to have to be.

How about moving to the edge in the center? Then he'll capture the whole side until someone else claims his place, rinse and repeat.

> doesn't matter how many players there are. suppose there's one ice cream guy. where is he going to put his ice cream hut? in the center. let's say another one shows up. where is he going to put his hut? in the center. the logic repeats.

That's not true. Let me explain. In this model (1 dimensional spectrum, be it distance or whatever), if a third player entered the market and the other two players are located at the center then the new players rational choice is to be on either side of the incumbents. He therefore sandwiched the middle player and stole all of his customers, the middle player will then move to the outside and again a player will have been sandwiched. The cycle repeats.

But if you add in costs associated with relocating (time or revenue lost or rebranding or moving costs) then this no longer is an effective strategy. A player might realize that this would happen and purposely not locate in the middle in order to avoid a fight. I don't quite remember the solution to a three player model but that was also based on an assumption that there are only three players.

It gets highly complicated when there is the possibility of new entrants. The lesson could be watch out for new entrants and stay nimble (so it is cheap for you to react when there are new entrants).

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