Menus Subscribe Search

Follow us


There's a Name for That

(PHOTO: EDWARD BURTYNSKY; COURTESY NICHOLAS METIVIER GALLERY, TORONTO/HOWARD GREENBERG & BRYCE WOLKOWITZ, NEW YORK)

The Law of Averageness

• March 01, 2013 • 4:00 AM

(PHOTO: EDWARD BURTYNSKY; COURTESY NICHOLAS METIVIER GALLERY, TORONTO/HOWARD GREENBERG & BRYCE WOLKOWITZ, NEW YORK)

Why do Burger King and McDonald’s start to sell the same salad? There’s a name for that phenomenon.

Why do Burger King and McDonald’s offer indistinguishable chicken salads—often right across the street from each other? Why do Home Depot and Lowe’s outlets huddle near each other like lovelorn teenagers? Why is Coke so much like Pepsi?

They’re just obeying Hotelling’s Law. Stanford University economist Harold Hotelling posited back in 1929 that rival sellers tend to gravitate toward each other—in location, price, and product offerings—because otherwise they risk losing some of the broad mainstream of customers. In other words, if your competitor has found something that sells or a way to sell it, the easiest way to horn in on their market share is to sell the same thing in the same way.

His insight, also known as the “principle of minimum differentiation,” is still widely used by economists and often applied to politics: candidates leaning too far left or right risk losing the essential moderate vote, so both Republicans and Democrats are pulled to centrist positions.

This phenomenon, as Hotelling himself pointed out, may help sellers keep up with their competitors, but it’s not always a good thing for the general public. It means many customers have to travel farther to buy a product than they would if the stores selling it were more spread out. The law also means that products all start to look the same.

“Our cities,” complained Hotelling, “become uneconomically large and the business districts within them too concentrated. Methodist and Presbyterian churches are too much alike; cider is too homogenous.”

Okay, so his examples could use an update. But considering this was years before the first suburban big-box mall opened, it’s some pretty prescient analysis.

Vince Beiser
Vince Beiser is an award-winning journalist based in Los Angeles, California. Follow him on Twitter @vincelb.

More From Vince Beiser

Tags:

If you would like to comment on this post, or anything else on Pacific Standard, visit our Facebook or Google+ page, or send us a message on Twitter. You can also follow our regular updates and other stories on both LinkedIn and Tumblr.

A weekly roundup of the best of Pacific Standard and PSmag.com, delivered straight to your inbox.

Follow us


Subscribe Now

Quick Studies

Banning Chocolate Milk Was a Bad Choice

The costs of banning America's favorite kids drink from schools may outweigh the benefits, a new study suggests.

In Battle Against Climate Change, Cities Are Left All Alone

Cities must play a critical role in shifting the world to a fossil fuel-free future. So why won't anybody help them?

When a Romance Is Threatened, People Rebound With God

And when they feel God might reject them, they buddy up to their partner.

How Can We Protect Open Ocean That Does Not Yet Exist?

As global warming melts ice and ushers in a wave of commercial activity in the Arctic, scientists are thinking about how to protect environments of the future.

What Kind of Beat Makes You Want to Groove?

The science behind the rhythms that get you on the dance floor.

The Big One

One state—Pennsylvania—logs 52 percent of all sales, shipments, and receipts for the chocolate manufacturing industry. March/April 2014