In this thesis, I examine vertical differentiation in the markets which have two market segments. Most of researches on differentiation deal with the markets in which the consumers are uniformly distributed according to consumer types. However, in general markets are not uniformly distributed, so this research considers market segments as the simplification of these markets.
In uniform cases, differentiation can be explained by Cournot Nash Equilibrium. This research shows that when market is composed of two market segments, differentiated Cournot Equilibrium doesn't exist and Stackelberg Equilibriums are generally differentiated. We can also see that Stackelberg Equilibrium has characteristics of tacit collusion.
