Horizontal and vertical differentiation: the Launhardt model

Rodolphe dos Santos  Ferreira; Jacques François Thisse

doi:10.1016/0167-7187(95)00486-6

Horizontal and vertical differentiation: the Launhardt model

Rodolphe dos Santos Ferreira^*, Jacques François Thisse

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

74 Citations (Scopus)

Abstract

We show how the spatial duopoly proposed by Launhardt in 1885, where firms have access to different transportation technologies, allows one to model in a simple and elegant way the two major types of product differentiation, i.e. horizontal and vertical. We consider the cases where firms are located near the market end points or near the market center. Launhardt's analysis of price determination is then extended by allowing firms to choose strategically their transportation rates. Subgame perfect Nash equilibria involve minimum (maximum) vertical product differentiation when horizontal product differentiation is large (small) enough.

Original language	English
Pages (from-to)	485-506
Number of pages	22
Journal	International Journal of Industrial Organization
Volume	14
Issue number	4
DOIs	https://doi.org/10.1016/0167-7187(95)00486-6
Publication status	Published - Jun 1996
Externally published	Yes

Keywords

Firm strategy
Industrial organization
Market performance
Market structure
Oligopoly
Other imperfect markets

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10.1016/0167-7187(95)00486-6

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abstract = "We show how the spatial duopoly proposed by Launhardt in 1885, where firms have access to different transportation technologies, allows one to model in a simple and elegant way the two major types of product differentiation, i.e. horizontal and vertical. We consider the cases where firms are located near the market end points or near the market center. Launhardt's analysis of price determination is then extended by allowing firms to choose strategically their transportation rates. Subgame perfect Nash equilibria involve minimum (maximum) vertical product differentiation when horizontal product differentiation is large (small) enough.",

keywords = "Firm strategy, Industrial organization, Market performance, Market structure, Oligopoly, Other imperfect markets",

author = "Ferreira, {Rodolphe dos Santos} and Thisse, {Jacques Fran{\c c}ois}",

year = "1996",

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AU - Thisse, Jacques François

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AB - We show how the spatial duopoly proposed by Launhardt in 1885, where firms have access to different transportation technologies, allows one to model in a simple and elegant way the two major types of product differentiation, i.e. horizontal and vertical. We consider the cases where firms are located near the market end points or near the market center. Launhardt's analysis of price determination is then extended by allowing firms to choose strategically their transportation rates. Subgame perfect Nash equilibria involve minimum (maximum) vertical product differentiation when horizontal product differentiation is large (small) enough.

KW - Firm strategy

KW - Industrial organization

KW - Market performance

KW - Market structure

KW - Oligopoly

KW - Other imperfect markets

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VL - 14

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JO - International Journal of Industrial Organization

JF - International Journal of Industrial Organization

IS - 4

ER -

Horizontal and vertical differentiation: the Launhardt model

Abstract

Keywords

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