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Abstract
In his 1929 paper, "Stability in Competition," Harold Hotelling was trying to show that price stability was possible in the case of 2-firm competition without resort to collusion. In the 60 years since its publication, the principle of minimum differentiation has generated a considerable amount of research activity. Almost without exception, these studies have shown that, once the assumptions of the model are relaxed in the direction of realism, it predicts dispersion, not agglomeration. The concept is thus incapable of explaining the often observed, and statistically proven, clustering of similar retail stores. However, the conceptualization has been transformed recently by the introduction of uncertainty and risk-reducing behavior. The even spacing of firms that occurs under certainty is replaced under uncertainty by the more conservative policy of clustering. These advances corroborate the findings of many pattern studies and the literature on consumer search and information-seeking behavior.