Vertical differentiation in a generalized model of spatial competition

In a duopoly model of spatial competition where consumer's surplus function contains both a linear and a quadratic disutility component, it is shown t hat the nature of differentiation at equilibrium depends on the distributio n of roles across firms and the relative weight of linear and quadratic com ponents in the transportation cost function. Vertical differentiation is mo re likely to obtain the lower the weight attached to the linear component a nd the higher the advantage enjoyed by one firm over the rival.