Vertically differentiated markets

This model produces the powerEil result that if customers vary in their taste for safety then for a given set of Erm preventive effort and prices, both Erms will have demand for their vertically differentiated product (Shaked and Sutton, 1982). In a free-entry competitive model, entry of new Erms occurs until prices are driven down to marginal cost. The nature of the marginal cost functions, the number of customers, and the distribution of their tastes will determine the socially-beneEcial equilibrium number of Erms, and hence levels of safety in the market. 

So far, we have only been talking about washing machines in general without differentiating between the various types. In terms of construction, the washing machines most frequently available on world markets can be divided into two groups, those with a horizontal drum axis and those with a vertical drum axis as shown in Fig. 3.1. 

Den Ouden, M., A.A. Dijkhuizen, R.B.M. Huirne and P.J.P. Zuurbier, 1996. Vertical cooperation in agricultural production-marketing chains, with special reference to product differentiation in pork. Agribusiness 12,277-290. 

Businesses, to be successful, must make and sell a useful product in the midst of intense competition. In a vertical, and limited, market such as the chemical community, similar products must be differentiated in order to attract customers. This fact spawns a large number of small vendors providing similar products, for example, in the area of PC-based molecular modeling software. The products are usually incompatible and have different user interfaces. 

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