The Animated Hotelling Model

The Hotelling model is used to illustrate the effects of product differentiation on market outcomes. After introducing the model, we create a demand function for the product and examine the socially optimal amount and scope of variety. We then examine how monopoly and competitive market structures result in too much or too little variety. Finally, extensions of the model are discussed. This presentation uses animation components in both Powerpoint and Flash to illustrate changes in prices and location.