Know your laws: Hotelling’s Law

Why are different airlines’ schedules so similar? Why are so many of the Asian restaurants located in the same part of town? And why don’t stores at shopping malls run each other out of business?

These questions and more are addressed by what’s known as Hotelling’s Law. In a 1929 journal article, economist Harold Hotelling pointed out that a lack of differentiation can help businesses maximize demand.

Logically, you might think that being as different as possible from your competitors would be an advantage, but in reality it (generally) takes more than one company to make a market. Macy’s and JCPenney generally benefit from being at the same mall, which then becomes a destination for department store shopping. If you’re in Boston and happen to be looking for a wedding dress, could you avoid going to Newbury Street?

Wikipedia has more, of course, but there are much more interesting examinations of the phenomenon out there hiding behind Google searches.

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