프랜차이즈 사업자와 일반 사업자간 경쟁과 제품 차별화 전략

This article analyzes duopoly competition between franchise and incumbent firm when products are differentiated vertically and horizontally. Vertical differentiation is associated with the existence of product quality gaps, while horizontal differentiation occurs when products differ according to variety. Three stage games are constructed within the quality variations. In the first stage, franchise and incumbent firm choose the location in Hotelling’s linear city as a spatial framework for horizontal differentiation. In the second stage, the franchise contract is designed between the franchisor and franchisee. Finally, the franchise and incumbent firm compete in price. The results reveal that subgame perfect equilibrium involves maximum horizontal differentiation when the quality variation is small enough. However, a franchise chooses minimum horizontal differentiation while an incumbent firm chooses maximum horizontal differentiation when the quality of a product provided by the franchise is relatively higher than that of an incumbent firm.