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Nesting horizontal and vertical differentiation

Jean Gabszewicz () and Xavier Wauthy

Regional Science and Urban Economics, 2012, vol. 42, issue 6, 998-1002

Abstract: We explore a variant of the Hotelling model which allows to nest horizontal and vertical differentiation into a unified setup whose key parameter is the relative natural market size of the firms. In this setup, equilibrium prices increase whenever population's disparity decreases. We also explore the properties of the model in the case of entry by a vertically differentiated product into an otherwise horizontally differentiated industry.

Keywords: Horizontal differentiation; Vertical differentiation; Hotelling (search for similar items in EconPapers)
JEL-codes: L13 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1016/j.regsciurbeco.2011.10.004

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