Ladies and gentlemen, get your game theorists hat on.
The Ice-cream Stand Game
You are an ice-cream truck driver, and it is your life’s dream to supply people with your dessert. The challenge is that you have an evil twin, and he’s made it his life goal to steal business from you. You pull up to Main Street, and sure enough, there is your evil twin. So where do you park in order to maximise sales?
The Game Rules
Draw a line on a sheet of paper—this is the span of our theoretical “Main Street”. Assume that customers are spread uniformly along this street—ie, they are not “clumped” in the middle. You and your evil twin are able to park anywhere along that line. Further, you and your evil twin split any customers in dispute. For instance, if you park at the20% mark (of the line) and your evil twin parks at the 50% mark, you capture all customers to your left, 20% of customers, and you would split all customers between you and your evil twin, half of the 30%. Where do you park your truck to maximise sales?
The Game Results
Park your car in the middle in order to maximise sales. Let’s assume that your evil twin, while nefarious, isn’t very bright. He parks at the 99% mark of the line, so you park at the 98% mark. You just captured 98%+1%/2=98.5% of the market—you win by a land slide. But what if your evil twin was game-theorist smart or you didn’t have second mover advantage, then where would you park? You would park your truck at the 50% mark because such a position would at-least-break-you-even/capture-more customers that way.
Real World Implications
Unlike the Ice-Cream Stand Game, many of us are clumped in the middle and are “political moderates.” When we see politicians who aren’t close to moderate, or close to the middle of Main Street, we tend to gravitate from them. Politicians know this, and this is the reason why most politicians sound the same—they are trying to capture more voters this way.
This phenomenon is not limited to public service. The reason you have Burger Kings next to McDonalds is because BK is trying to bifurcate the market. They are trying to capture any indiscriminate consumer by not being the extremist at the edge of the street.
All politicians sound the same and there is a BK next to every McDonalds because it is the game theorist’s equilibrium. To be close to one’s competitions maximizes one’s voter/customer sales.
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