Two producers offer differentiated goods to a representative consumer. The buyer has distinct marginal valuations for the quality of the products. Each producer knows perfectly the consumer’s taste for its own product, but remains uninformed about its taste for the rival’s product. When each...

We explore the joint determination of product differentiation strategy and corporate leverage in a setting where (i) product differentiation is valued by customers; (ii) debt is necessary to discipline managers; and (iii) liquidation is costly for customers, in particular, when products are...