Hotelling's model of spatial competition

Abstract

Seventy years ago, Harold Hotelling’s paper ‘Stability in Competition’ was published in the Economic Journal. It represents a seminal contribution to the theory of spatial competition. Providing an appealing framework to address the nature of competition in characteristics as well as geographical space, it has resulted in a vast amount of academic research. In fact, Hotelling’s line has become the single most popular model of horizontal differentiation in economics. Product selection is a critical decision for firms. Firms differentiate their products to decrease the competition between them and to have some market power. Following Lancaster (1979, ch. 2), it is common to distinguish between..