Network competition and branch differentiation with consumer heterogeneity

The paper provides a general framework for the analysis of noncooperative competition between multi-branch networks when consumers have heterogeneous preferences. This framework allows for ill-studied conditions, such as branch loyalty and economies of scope, to be explored in terms of their role in shaping address solutions and firm profits. Geographic and quality differentiation as well as firm profits are shown to be dependent upon the magnitude of the loyalty factor and upon the extend of economies of scope. Real world situations in the retail industry are interpreted in the light of the results of the analysis.