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From economics point of view (game theory perhaps),
Why are there a lot of similiar shops gather at one place? For example, petrol station, supermarket, workshop and so on.

2006-06-15 17:20:56 · 5 answers · asked by Anonymous in Social Science Economics

5 answers

The field of economics that looks most at this is called Industrial Organization. Look at the link in the source to look a little bit more into Industrial Organization, which, as you mention, uses a lot of game theory in its theoretical analysis.

To answer your question, out of the top of my head, similar businesses tend to gather at same locations or streets because it makes them all be more identifiable... consumer would identify certain area as the, lets say, electronics location. Consumers would rather go to a location where, if they don´t find what they need at one store, they won´t want to go far to check out another store... also, in a same location, its easier for consumers to compare prices. Businesses need consumers, so its better to get them all in the same place and try to get the biggest piece of the pie. Another reason is the copy-cat policy. If a store is having great sales at a location, another business my try to open a store near by to get some of that. Also in the copycat reason, if a profitable store opens in a certain location, it is assumed by other businesses that the original already made a marketing study that took them to open a store in that location.

Hope this helps. Good luck.

2006-06-15 19:40:26 · answer #1 · answered by Chess 4 · 2 0

Competition. If you're the only gas station in the area, you get 100% of the business. It would make sense for another gas owner to move in, and take 50% of that, seeing as people are already in that area looking for gas.

People go to a strip mall for clothes, it makes sense to put my clothes store there because my target market is already gathered in the general vacinity.

2006-06-16 00:24:45 · answer #2 · answered by Swarms 3 · 0 0

Competition. If one establishment is doing well in a spot, soon enough, others will want in on the customer base that spot has found. If one fisherman finds a good lake, soon enough other fisherman will cast nets at the same spot...except in this example fisherman are businesses and consumers are...fish?

2006-06-16 00:26:11 · answer #3 · answered by jermaine 4 · 0 0

The goodwill of one reputed shop draws more and more customers to the area it is located. Thus, smaller shops/retailers set up shops in the vicinity to cater to those customers' demand which is in excess of the main shop's available supply. Thus they earn revenue. Over time, the other shops get a goodwill of their own and other shops set up. the chain goes on. Its called the chain goodwill theory

2006-06-16 00:26:36 · answer #4 · answered by Anonymous · 0 0

its all about competition

2006-06-16 00:23:52 · answer #5 · answered by JIMMY j 5 · 0 0

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