Niche differentiation typically results in:
“Reduced competition and coexistence” for niche differentiation typically results in. This relationship follows from the ecological mechanism represented by the terms in the item, not merely from an association between their names. A niche is the multidimensional set of abiotic conditions, resources, and biotic relationships under which a population can persist. The fundamental niche reflects physiological and resource limits, while the realized niche is modified by competitors, consumers, mutualists, and dispersal barriers. The remaining alternatives—“Increased niche overlap”, “Increased competition”, “Local extinction”—refer to different states, processes, or scales and therefore do not express the same causal relationship. Niche differentiation reduces overlap by separating species along resource, space, or time axes. Such partitioning can stabilize coexistence when each species performs relatively better under the conditions it uses most strongly. Field observations could test this account by measuring the proposed driver and the demographic or ecosystem response while controlling plausible confounding factors.
Ref: Ecology: Concepts and Applications, Molles, 9th Ed., Ch. 13