Product line strategy within a vertically differentiated duopoly

- We consider a duopoly in which firms supply two vertically differentiated products.
- Two firms have a cost asymmetry of high-quality good.
- We see that the firm with lower/higher cost produces more of high/low-quality good.
- By the quality superiority and the cost efficiency ratios, we mark cannibalization.
- We illustrate graphically product line strategy of firms by two ratios.

We consider a duopoly model in which firms with different costs supply two vertically differentiated products in the same market. We characterize graphically firms' product line strategies through the quality superiority and the relative cost efficiency ratios.