Vertical product differentiation with subcontracting

The paper examines the effects of subcontracting on vertical product differentiation in a spatial competition model. It is shown that the level of differentiation is determined by the consignor's bargaining power and the ratio of the transport rates between the final product and the subcontracted input. Furthermore, the paper finds that part of the results obtained under horizontal product differentiation are not reproduced in a vertical product context. Copyright (c) 2009 the author(s). Journal compilation (c) 2009 RSAI.