Survival at the center—The stability of minimum differentiation

We model a Hotelling market with multidimensional product differentiation in an evolutionary framework. Both evolutionary stability (in the sense of Schaffer, 1989) and stochastic stability (following Kandori et al., 1993 and Young, 1993) are analyzed. It is shown that firms move towards the center in product space, i.e. a “principle of minimum differentiation” on all dimensions of the product space applies.