Spatial competition with profit†maximising and labour†managed firms**I would like to gratefully acknowledge the hospitality and financial support of the Institute of Economics and CIE, University of Copenhagen. I would also like to thank the editor, Raymond Florax, along with two anonymous referees and Jeroen Hinloopen for useful comments and suggestions. I alone am responsible for any errors or omissions in the work

The nature of the equilibria arising under spatial differentiation is investigated here in a duopoly model, where at least one firm maximises value added per worker. The study shows that if firms’objectives differ, there exists a subgame perfect equilibrium in pure strategies, which is possibly characterised by asymmetric locations. If both firms are labour†managed, there exists a (symmetric) subgame perfect equilibrium in pure strategies with firms located at the first and third quartiles, if and only if the setup cost is low enough. Otherwise, undercutting is profitable.