Hotelling's lemma

Hotelling's Lemma is a fancy way of saying that when businesses are competing, they will often end up offering similar products or services.

Think of it like this: imagine you and your friend are selling lemonade on a street. If your friend starts charging more for their lemonade, people will come to you instead because your lemonade is cheaper.

But, if you make your lemonade too cheap, your friend might lower their prices to compete with you and soon you'll both be charging the same amount. This is where Hotelling's Lemma comes in - it predicts that businesses will often end up charging similar prices even if they started out different.

This is also seen in other industries as well, like when two gas stations are across the street from each other and charge about the same price for gas. Or when two stores sell the same toy and set their prices similarly to compete with each other.

So, Hotelling's Lemma is just a way of explaining how businesses often end up offering similar products at similar prices when they're competing with each other.