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Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models

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  • Cremer, Helmuth
  • Thisse, Jacques-Francois

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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  • Cremer, Helmuth & Thisse, Jacques-Francois, 1991. "Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 383-390, June.
    • Handle: RePEc:bla:jindec:v:39:y:1991:i:4:p:383-90
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