^aEconomics Department, Wake Forest University, 123 Carswell Hall, Box 7505, Winston-Salem, NC 27109, USA. E-mail: mccannbc@wfu.edu

Abstract

The standard vertical-product-differentiation model assumes that quality and quantity are independent choices. That is, the choice of quality is separated from the decision of the number of units to produce. For certain products this is not appropriate. This note presents an extension to the vertical-product-differentiation model to incorporate the relationship between quality and quantity.