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Xavier Y Wauthy
''Market coverage and the nature of product differentiation: a note''
( 2010, Vol. 30 No.2 )
In this note, we analyze the equilibrium outcomes of pricing games with product differentiation in relation with the extent of market coverage. It is a received idea in the IO literature that the horizontal and vertical models of product differentiation are almost formally equivalent. We show that this idea turns out to be wrong when the full market coverage assumption is relaxed. We then argue that there exist two fundamentally different classes of address-models of differentiation, although their difference is not perfectly captured by the standard horizontal/vertical typology.
Keywords: price competition, product differentiation, vertical differentiation, horizontal differentiation
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
L1 - Oligopoly and Other Imperfect Markets
Manuscript Received : Jan 04 2010 Manuscript Accepted : May 03 2010

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