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A SUCCESSFUL BUSINESS STRATEGY

     


       In a town, there is a long street connecting bus station and train station.  A hotelier thought if he start a catering business at the middle of that street, he would be able to attract floating population from both the stations.  He started a hotel and flourished.  Some time later, another business men thought if he opens a Restaurant near bus-stand, he would get all the crowd from the bus-stand, but will loose all the people from railway station to the first established hotel.  So, starting his restaurant near the first hotel would be the optimum solution.  So the second business-man's thinking ran in the same lines as first business-man's.  Hence the second hotel came up near the first one.  Over the time, many business people thought in the same lines and many hotel came up near one another.  Slowly, the entire street was lined up with best hotels and the street was called 'Hotel street".  The town also became city.

      That is, why we see many hotels near one another in many towns.  This 'stabilization phenomenon' is called 'Nash equilibrium' in Economics.  It was invented by John Nash and he was given Nobel prize in 1994.  His life was made into film.  The bio-pic is called, 'the beautiful mind'. Business and games are similar.  This strategy is also applied in game theory.

 Definition:  " If each player has chosen a strategy and no player can benefit by changing strategies while the other players keep theirs unchanged, then the current set of strategy and their corresponding pay-offs constitutes a Nash Equilibrium" - from Wikipedia

 Examples
    1. Driving
     Say, two cars are moving in opposite directions on a road.  Suppose one driver is going in his left side and another driver attempts to move to his right side, than there will be a collision.  The best strategy is 'both drivers must keep to same side - left or right -decided by the countries' law and practice.  "Nash equilibrium' will force them to drive correctly and they will automatically do it.

 2. Medicine
     Medical shops, labs, hospitals doctors, whole sale companies all usually crowd around in one place.

 3. Advertisement and price
     Competitive companies spend almost equally on advertisements.  The price of their products also stabilizes in a particular price band.

 4. Law enforcement
     Say, traffic police have to control huge moving crowd.  If they give short, fast moving  paths to the crowd, every body will be in the right track without pandemonium.  That is, if authorities follow 'Nash strategy', it will be easier to implement law and order.

 Education:
     All students fall in the same course and same field in a particular year.  Because the students think that is the best option at that time.

 Wars:
     No country intend to engage in a war.  Because we know, there will be loss for everybody and that is not a good strategy.  But still, every country will go on spend for war arsenal.  The army and arsenal is always a country's deterrent.     
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