[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:15.11,0:00:19.08,Default,,0000,0000,0000,,Why are gas stations always built\Nright next to other gas stations?
Dialogue: 0,0:00:19.11,0:00:21.82,Default,,0000,0000,0000,,Why can I drive for a mile\Nwithout finding a coffee shop
Dialogue: 0,0:00:21.84,0:00:24.14,Default,,0000,0000,0000,,and then stumble\Nacross three on the same corner?
Dialogue: 0,0:00:24.17,0:00:27.05,Default,,0000,0000,0000,,Why do grocery stores,\Nauto repair shops and restaurants
Dialogue: 0,0:00:27.08,0:00:28.72,Default,,0000,0000,0000,,always seem to exist in groups
Dialogue: 0,0:00:28.74,0:00:31.90,Default,,0000,0000,0000,,instead of being spread evenly\Nthroughout a community?
Dialogue: 0,0:00:31.92,0:00:33.46,Default,,0000,0000,0000,,While there are several factors
Dialogue: 0,0:00:33.48,0:00:36.16,Default,,0000,0000,0000,,that might go into deciding\Nwhere to place your business,
Dialogue: 0,0:00:36.19,0:00:39.80,Default,,0000,0000,0000,,clusters of similar companies can\Nbe explained by a very simple story
Dialogue: 0,0:00:39.82,0:00:42.29,Default,,0000,0000,0000,,called Hotelling's Model\Nof Spatial Competition.
Dialogue: 0,0:00:43.12,0:00:45.22,Default,,0000,0000,0000,,Imagine that you sell\Nice cream at the beach.
Dialogue: 0,0:00:45.24,0:00:48.05,Default,,0000,0000,0000,,Your beach is one mile long\Nand you have no competition.
Dialogue: 0,0:00:48.08,0:00:51.27,Default,,0000,0000,0000,,Where would you place your cart\Nin order to sell the most product?
Dialogue: 0,0:00:51.29,0:00:52.37,Default,,0000,0000,0000,,In the middle.
Dialogue: 0,0:00:52.39,0:00:55.42,Default,,0000,0000,0000,,The one-half-mile walk may\Nbe too far for some people
Dialogue: 0,0:00:55.44,0:00:56.74,Default,,0000,0000,0000,,at each end of the beach,
Dialogue: 0,0:00:56.76,0:00:59.77,Default,,0000,0000,0000,,but your cart serves\Nas many people as possible.
Dialogue: 0,0:00:59.79,0:01:01.12,Default,,0000,0000,0000,,One day you show up at work
Dialogue: 0,0:01:01.14,0:01:03.52,Default,,0000,0000,0000,,just as your cousin Teddy\Nis arriving at the beach
Dialogue: 0,0:01:03.55,0:01:04.90,Default,,0000,0000,0000,,with his own ice cream cart.
Dialogue: 0,0:01:04.92,0:01:06.32,Default,,0000,0000,0000,,In fact, he's selling
Dialogue: 0,0:01:06.34,0:01:08.52,Default,,0000,0000,0000,,exactly the same type\Nof ice cream as you are.
Dialogue: 0,0:01:08.54,0:01:10.79,Default,,0000,0000,0000,,You agree that you will split\Nthe beach in half.
Dialogue: 0,0:01:10.82,0:01:13.63,Default,,0000,0000,0000,,In order to ensure that customers\Ndon't have to walk too far
Dialogue: 0,0:01:13.66,0:01:16.57,Default,,0000,0000,0000,,you set up your cart a quarter mile\Nsouth of the beach center,
Dialogue: 0,0:01:16.60,0:01:18.41,Default,,0000,0000,0000,,right in the middle of your territory.
Dialogue: 0,0:01:18.44,0:01:20.75,Default,,0000,0000,0000,,Teddy sets up a quarter mile\Nnorth of the center,
Dialogue: 0,0:01:20.78,0:01:22.77,Default,,0000,0000,0000,,in the middle of Teddy territory.
Dialogue: 0,0:01:22.79,0:01:25.94,Default,,0000,0000,0000,,With this agreement, everyone south\Nof you buys ice cream from you.
Dialogue: 0,0:01:25.96,0:01:29.49,Default,,0000,0000,0000,,Everyone north of Teddy buys from him,\Nand the 50% of beachgoers in between
Dialogue: 0,0:01:29.51,0:01:31.17,Default,,0000,0000,0000,,walk to the closest cart.
Dialogue: 0,0:01:31.20,0:01:33.75,Default,,0000,0000,0000,,No one walks\Nmore than a quarter of a mile,
Dialogue: 0,0:01:33.78,0:01:36.65,Default,,0000,0000,0000,,and both vendors sell\Nto half of the beachgoers.
Dialogue: 0,0:01:36.68,0:01:40.84,Default,,0000,0000,0000,,Game theorists consider\Nthis a socially optimal solution.
Dialogue: 0,0:01:40.86,0:01:44.35,Default,,0000,0000,0000,,It minimizes the maximum number\Nof steps any visitor must take
Dialogue: 0,0:01:44.38,0:01:46.35,Default,,0000,0000,0000,,in order to reach an ice cream cart.
Dialogue: 0,0:01:46.38,0:01:48.24,Default,,0000,0000,0000,,The next day, when you arrive at work,
Dialogue: 0,0:01:48.26,0:01:51.03,Default,,0000,0000,0000,,Teddy has set up his cart\Nin the middle of the beach.
Dialogue: 0,0:01:51.06,0:01:54.30,Default,,0000,0000,0000,,You return to your location\Na quarter mile south of center
Dialogue: 0,0:01:54.32,0:01:57.07,Default,,0000,0000,0000,,and get the 25% of customers\Nto the south of you.
Dialogue: 0,0:01:57.09,0:02:00.64,Default,,0000,0000,0000,,Teddy still gets all of the customers\Nnorth in Teddy territory,
Dialogue: 0,0:02:00.66,0:02:04.70,Default,,0000,0000,0000,,but now you split the 25% of people\Nin between the two carts.
Dialogue: 0,0:02:04.73,0:02:07.58,Default,,0000,0000,0000,,Day three of the ice cream wars,\Nyou get to the beach early,
Dialogue: 0,0:02:07.61,0:02:10.17,Default,,0000,0000,0000,,and set up right in the center\Nof Teddy territory,
Dialogue: 0,0:02:10.19,0:02:13.63,Default,,0000,0000,0000,,assuming you'll serve\Nthe 75% of beachgoers to your south,
Dialogue: 0,0:02:13.66,0:02:17.03,Default,,0000,0000,0000,,leaving your cousin to sell\Nto the 25% of customers to the north.
Dialogue: 0,0:02:17.05,0:02:20.52,Default,,0000,0000,0000,,When Teddy arrives,\Nhe sets up just south of you
Dialogue: 0,0:02:20.54,0:02:22.45,Default,,0000,0000,0000,,stealing all of the southerly customers,
Dialogue: 0,0:02:22.48,0:02:25.26,Default,,0000,0000,0000,,and leaving you with a small group\Nof people to the north.
Dialogue: 0,0:02:25.28,0:02:29.34,Default,,0000,0000,0000,,Not to be outdone, you move 10 paces\Nsouth of Teddy to regain your customers.
Dialogue: 0,0:02:29.36,0:02:32.84,Default,,0000,0000,0000,,When you take a mid-day break,\NTeddy shuffles 10 paces south of you,
Dialogue: 0,0:02:32.86,0:02:36.54,Default,,0000,0000,0000,,and again, steals back all the customers\Nto the far end of the beach.
Dialogue: 0,0:02:36.56,0:02:38.13,Default,,0000,0000,0000,,Throughout the course of the day,
Dialogue: 0,0:02:38.16,0:02:40.42,Default,,0000,0000,0000,,both of you continue\Nto periodically move south
Dialogue: 0,0:02:40.44,0:02:42.84,Default,,0000,0000,0000,,towards the bulk of the ice cream buyers,
Dialogue: 0,0:02:42.86,0:02:45.86,Default,,0000,0000,0000,,until both of you eventually end up\Nat the center of the beach,
Dialogue: 0,0:02:45.88,0:02:49.72,Default,,0000,0000,0000,,back to back, each serving 50%\Nof the ice-cream-hungry beachgoers.
Dialogue: 0,0:02:49.74,0:02:51.94,Default,,0000,0000,0000,,At this point, you\Nand your competitive cousin
Dialogue: 0,0:02:51.96,0:02:54.95,Default,,0000,0000,0000,,have reached what game theorists\Ncall a Nash Equilibrium -
Dialogue: 0,0:02:54.98,0:02:57.77,Default,,0000,0000,0000,,the point where neither of you\Ncan improve your position
Dialogue: 0,0:02:57.80,0:02:59.94,Default,,0000,0000,0000,,by deviating from your current strategy.
Dialogue: 0,0:02:59.96,0:03:01.40,Default,,0000,0000,0000,,Your original strategy,
Dialogue: 0,0:03:01.42,0:03:04.45,Default,,0000,0000,0000,,where you were each a quarter mile\Nfrom the middle of the beach,
Dialogue: 0,0:03:04.47,0:03:07.09,Default,,0000,0000,0000,,didn't last, because it wasn't\Na Nash Equilibrium.
Dialogue: 0,0:03:07.11,0:03:10.94,Default,,0000,0000,0000,,Either of you could move your cart\Ntowards the other to sell more ice cream.
Dialogue: 0,0:03:10.96,0:03:13.25,Default,,0000,0000,0000,,With both of you now\Nin the center of the beach,
Dialogue: 0,0:03:13.27,0:03:16.90,Default,,0000,0000,0000,,you can't reposition your cart\Ncloser to your furthest customers
Dialogue: 0,0:03:16.93,0:03:19.21,Default,,0000,0000,0000,,without making your current\Ncustomers worse off.
Dialogue: 0,0:03:19.24,0:03:22.57,Default,,0000,0000,0000,,However, you no longer have\Na socially optimal solution,
Dialogue: 0,0:03:22.59,0:03:24.59,Default,,0000,0000,0000,,since customers at either end of the beach
Dialogue: 0,0:03:24.62,0:03:27.60,Default,,0000,0000,0000,,have to walk further than necessary\Nto get a sweet treat.
Dialogue: 0,0:03:27.63,0:03:29.57,Default,,0000,0000,0000,,Think about all the fast food chains,
Dialogue: 0,0:03:29.59,0:03:32.27,Default,,0000,0000,0000,,clothing boutiques,\Nor mobile phone kiosks at the mall.
Dialogue: 0,0:03:32.30,0:03:33.88,Default,,0000,0000,0000,,Customers may be better served
Dialogue: 0,0:03:33.90,0:03:36.16,Default,,0000,0000,0000,,by distributing services\Nthroughout a community,
Dialogue: 0,0:03:36.19,0:03:39.52,Default,,0000,0000,0000,,but this leaves businesses vulnerable\Nto aggressive competition.
Dialogue: 0,0:03:39.54,0:03:42.79,Default,,0000,0000,0000,,In the real world, customers come\Nfrom more than one direction,
Dialogue: 0,0:03:42.81,0:03:45.72,Default,,0000,0000,0000,,and businesses are free to compete\Nwith marketing strategies,
Dialogue: 0,0:03:45.74,0:03:48.50,Default,,0000,0000,0000,,by differentiating their product line,\Nand with price cuts,
Dialogue: 0,0:03:48.52,0:03:50.25,Default,,0000,0000,0000,,but at the heart of their strategy,
Dialogue: 0,0:03:50.28,0:03:53.62,Default,,0000,0000,0000,,companies like to keep their competition\Nas close as possible.