This paper studies how the type and magnitude of the interaction between quality characteristics determine the nature of the differentiation strategies of firms. The vertical differentiation models with multi-characteristic product preferences consider that the characteristics are independent. We incorporate a non-additive component into a two-dimensional model. Sufficiently high attribute dependence gives rise to maximal differentiation in both qualities: if the qualities are complements, one firm offers the highest quality in both attributes, while the other firm the lowest; on the other hand, if the qualities are substitutes, each firm specializes in one of the qualities. The usual outcome with maximal differentiation in one quality dimension and minimal in the other is achieved if there is low or no attribute dependence. In our model, the magnitude of attribute dependence determines whether differentiation relaxes or intensifies subsequent price competition. Some examples from the banking sector are presented to illustrate the model.

中文翻译：

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具有属性依赖的二维垂直微分

本文研究了质量特征之间相互作用的类型和大小如何决定企业差异化战略的性质。具有多特征产品偏好的垂直差异化模型认为特征是独立的。我们将一个非加性组件合并到一个二维模型中。足够高的属性依赖性会导致两种品质的最大差异：如果品质是互补的，则一家公司在这两种属性上都提供最高品质，而另一家公司则最低；另一方面，如果品质是替代品，则每个公司都专注于其中一种品质。如果属性依赖性低或没有属性依赖性，那么通常的结果是在一个质量维度上差异最大而在另一个维度上差异最小。在我们的模型中，属性依赖的大小决定了差异化是放松还是加剧了后续的价格竞争。提供了一些来自银行业的例子来说明该模型。