Example of horizontal vs vertical product differentiation

Reference no: EM13691127

Consider a city with many banks. We model the market as having a monopolistically competitive market structure with horizontal product differentiation as in class.1

Suppose that each bank sells loan units (q) at price p where quantity units are in loans/year and price units are in $/loan.

a) Explain ONE example of a way that banks could horizontally differentiate their bank products and why this is an example of horizontal vs. vertical product differentiation.

b) Identify 3 fixed and 3 variable costs for bank loans.

Reference no: EM13691127

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