TY - JOUR
T1 - Horizontal and vertical differentiation
T2 - the Launhardt model
AU - Ferreira, Rodolphe dos Santos
AU - Thisse, Jacques François
PY - 1996/6
Y1 - 1996/6
N2 - 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.
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
UR - http://www.scopus.com/inward/record.url?scp=1542428542&partnerID=8YFLogxK
U2 - 10.1016/0167-7187(95)00486-6
DO - 10.1016/0167-7187(95)00486-6
M3 - Article
AN - SCOPUS:1542428542
SN - 0167-7187
VL - 14
SP - 485
EP - 506
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
IS - 4
ER -