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Location models of horizontal differentiation: a special case of vertical differentiation models
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Location models of horizontal differentiation: a special case of vertical differentiation models

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  • CREMER, Helmuth
  • THISSE, Jacques-François

Abstract

The authors study the relationship that exists between two families of models of product differentiation: the class of location or Hotelling-type models of horizontal differentiation, and models of vertical differentiation. Their main result is that every model belonging to a very large class of Hotelling-type models (including all the commonly used specifications) is actually a special case of a vertical product differentiation model. Formally speaking this means that the Hotelling type-model and the corresponding vertical product differentiation model are equivalent. Specifically, the authors show that the equilibria emerging in the two categories of models are identical in a well defined sense. Copyright 1991 by Blackwell Publishing Ltd.
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Suggested Citation

  • CREMER, Helmuth & THISSE, Jacques-François, 1991. "Location models of horizontal differentiation: a special case of vertical differentiation models," LIDAM Reprints CORE 931, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:931
    Note: In : The Journal of Industrial Economics, 39(4), 383-390, 1991
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