The Differentiation Triangle

Marcel Canoy and Martin Peitz

Journal of Industrial Economics, 1997, vol. 45, issue 3, 305-328

Abstract: The paper formalizes the observation that submarkets for high‐quality and low‐quality variants are markedly different from each other. We study a simple model where variants of low quality cannot be horizontally differentiated, whereas customers disagree about the value of variants in the high‐quality range. We determine the outcome under price competition in the differentiation triangle with sequential entry when each firm can develop the vertical product line or decide to follow a niche strategy, i.e. to develop only one variant.

Date: 1997
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