Hotelling's law

Hotelling's law is an observation in economics that in many markets it is rational for producers to make their products as similar as possible. This is also referred to as the principle of minimum differentiation as well as Hotelling's linear city model. The observation was made by Harold Hotelling (1895–1973) in the article "Stability in Competition" in Economic Journal in 1929. The opposing phenomenon is product differentiation, which is usually considered to be a business advantage if executed properly. Example Suppose there are two competing shops located along the length of a street running north and south, with customers spread equally along the street. Both shop owners want their shops to be where they will get most market share of customers. If both shops sell the same range of goods at the same prices then the locations of the shops are themselves the 'products'. Each customer will always choose the nearer shop as it is disadvantageous to travel to the farther.