Where would you put your shop?
Hotelling used spatial competition to study how seller location affects demand when buyers prefer nearby options.
Inside this model
Customers are uniformly spread from 0 to 100 and choose the nearer seller at equal prices. The indifference point is the midpoint of shop locations. Your market share equals the length of street nearer your shop; co-location splits customers evenly. The plot shows your share at each possible location holding the rival fixed.
Out in the world
A practical use
Two food stalls, clinics, or service outlets may choose locations partly in response to a nearby rival.
A useful lens. Not a universal law.
- Equal prices, uniform customers, identical quality and pure distance costs are strong assumptions. The chart does not solve a full price-and-location competition model.
Associated thinkers
Further reading
Explore the original research or the teaching reference behind this experiment.
Harold Hotelling — Stability in Competition ↗