Advanced Placement (AP) Human Geography Practice Exam

What does locational interdependence theory suggest about competitors?

1. They should establish distance to minimize conflicts.

2. They will seek to locate near each other to maximize sales.

3. They must diversify to avoid customer overlap.

4. They should avoid clustering to reduce competition.

The correct answer is: They will seek to locate near each other to maximize sales.

Locational interdependence theory, formulated by economist Harold Hotelling, posits that businesses in similar industries will tend to place themselves in close proximity to one another. This behavior is motivated by the desire to attract a larger customer base. When competitors cluster together, they benefit from drawing more customers collectively to the location, as consumers may visit multiple stores within that area, increasing foot traffic and potential sales for each business. The rationale behind this strategy is rooted in consumer behavior; customers may prefer to have options in close proximity, making it more convenient for them to shop around. This often results in increased visibility and accessibility for the businesses involved. Therefore, being located near one another can enhance overall sales potential for competitors rather than serving to directly diminish sales through increased competition. In summary, the concept emphasizes that competitors in the same market tend to group together to maximize their reach to consumers and boost overall business performance.