My sister lives in north of atlanta. During Christmas holiday, our family drive into malls and malls through highway exits.
Stability in Competition
Harold Hotelling (1929) The Economic Journal | link
In this paper, consumers are uniformly distributed along a line (a street, beach, political spectrum). Location is the only dimension of differentiation. There are two firms and each firm chooses a single location on the line. Entry and exit are ignored. Consumers buy from the firm that minimizes price + transportation cost. Every consumer buys from one of the firms; there is no opting out. Transportation cost increases linearly with distance. Either prices are exogenous or competition forces them to be identical, so location is the only strategic variable.
Competition logic is like: Each firm asks: “If my rival stays put, can I gain customers by moving slightly?”
So, if one firm is not located at the center of the market, it can always gain customers by moving slightly toward the other firm’s territory. That move shifts the midpoint in its favor and captures more consumers.
This incentive continues until both firms locate at the median of the consumer distribution (the center of the line). The unique stable outcome is minimum differentiation: competing firms choose the same location, typically the center of the market.
The equilibrium outcome is privately rational but socially inefficient. Economists are studying price of anarcky way before computer scientists got obsessed with the idea.