Hotelling's theory of minimum differentiation

Those who read political science must have heard about Harold Hotelling. He proposed a model called Hotelling’s Model, or what I prefer to see as the theory of minimum differentiation. I found a good explanation of the theory on a website. The explanation goes like this… Suppose that two owners of refreshment stands, George and Henry, are trying to decide where to locate along a stretch of beach. Imagine there are three points along the beach, with point A at the left end, point C at the right end, and point B in between A and C. There are 100 customers located at even intervals along this beach from point A to C, and that a customer will buy only from the closest vendor. Imagine that initially the vendors locate at points A and C. These locations would minimize the average travelling costs of the buyers and would result in each vendor getting one half of the business. If George moved from point A on the left to point B in the middle, he would keep all customers to his left, and get some of Henry's customers. To compete, Henry would also want to move toward point B in the centre, so that he can keep the customers to his right, while not losing the customers who are at the centre to George. Thus, in order to gain the most customers, both vendors would eventually locate together in the middle. This story of the beach was first told a half century ago by Harold Hotelling, and is called Hotelling's model. Though it can give some insights into businesses decisions concerning location and product characteristics, the model has been more useful in explaining certain political phenomena. Instead of two refreshment stands along a beach trying to attract dollars from customers, consider two political parties along the political spectrum from left-wing it right-wing trying to attract votes from voters. Only the party who attracts the most votes will win, and a party must locate or identify itself as being nearer to more voters than its opponent to attract votes. With these rules, there is a strong tendency for each party to move to the middle - where most voters are located.

In short, in order to gain the most votes, the parties try to locate themselves somewhere in the middle-ground, with the hope that they will garner more votes from the opponent. Since both of them locate to the middle, they eventually minimise the differences between themselves.

I will write more on why I find this theory interesting in the near future.