Steven Salop introduced a variation of this model exhibiting continuous rotational symmetry and multiple goods. For 10 points each:
[10h] Name this spatial model that provides the basis for its namesake’s principle of minimum differentiation, which states that it is rational for producers to make their goods as similar as possible.
ANSWER: Hotelling’s linear city model [or Hotelling’s location model or the linear city model; accept Hotelling’s law; prompt on linear model; reject “Hotelling’s lemma” or “Hotelling’s rule”]
[10m] Spatial economic models employ this market structure with consumer preference dictated by location. This type of imperfect competition is characterized by many firms selling differentiated products.
ANSWER: monopolistic competition [prompt on MC; reject “monopoly”]
[10e] In Hotelling’s linear city model, consumers choose firms based only on transportation cost and this variable. In monopolistic competition, firms set this variable for goods and services.
ANSWER: price
<JC, Social Science>