I never liked the way Paizo handled shotguns in their game, so I created my own version. Here is the shotgun rules for my campaign:
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Blunderbuss --- 2,000 gp, 2d6(S) 2d8(M) (x2 19-20) 10 Range, 1–2 Misfire(10 ft.) 1 Capacity, 8 lbs., B and P, Scatter/Sawed off
Shotgun --- 5,000 gp, 1d10(S) 1d12(M) (x2 19-20) 20 Range, 1–2 Misfire, 1 Capacity, 12 lbs., B and P, Scatter
Double Barreled Shotgun --- 7,000 gp, 1d10(S) 1d12(M) (x2 19-20) 20 Range, 1–2 Misfire, 2 Capacity, 15 lbs., B and P, Scatter
Scatter – Blunderbusses and shotguns operate differently than other firearms. Instead of firing a single bullet, these weapons fire a mass of pellets at their target. This has certain advantages and disadvantages.
As the pellets fly out of the barrel, they disperse. This dispersion increases the further the target is. Because of this, it is much easier to hit an object at range with a shotgun than a regular firearm. As a result, there is no range penalty for shooting a shotgun. Shotguns also have the advantage of covering a larger area with the shot making it easier to hit smaller targets – as a result, the AC bonus of creatures smaller than medium is negated.
However, the downside to this dispersion is the fact that there is a loss of energy from the shot. For every range increment after the first, the dice damage done by a shotgun decreases by one step per increment (d12, d10, d8, d6, d4, d3, no damage). Both dice decrease every step for a blunderbuss.
Finally, shotguns pellets lack the penetrating power of bullets. As a result, to hit an opponent with a shotgun requires a regular Attack roll. They do not gain the benefit of a ranged touch attack.
Sawed off – Blunderbusses and some modified shotguns have the sawed off trait. These weapons have reduced range increments, but firing them in melee does not draw an attack of opportunity. Blunderbusses always have the sawed off trait, but shotguns must be modified to give it that trait (Reduce range for sawed off shotgun to 10)
Your rule doesn't actually explain how scatter shots work.
And shotguns can handle firing regular bullets as well. How does this spread handle weapon enhancements? Does it count as an area effect?