Quality as vertical Product Differentiation Phlips and Thisse(1982)emphasized the distinction between horizontal and vertical product ifferentiation in the following way Differentiation is said to be horizontal if when the level of the product's characteristic is augmented in the product's space, there exists a consumer whose utility rises and there exists another consumer whose utility falls Differentiation is said to be vertical if all consumers benefit when the level of the product's characteristic is augmented in the product spaceQuality as Vertical Product Differentiation • Phlips and Thisse (1982) emphasized the distinction between horizontal and vertical product differentiation in the following way: • Differentiation is said to be horizontal if, when the level of the product's characteristic is augmented in the product's space, there exists a consumer whose utility rises and there exists another consumer whose utility falls. • Differentiation is said to be vertical if all consumers benefit when the level of the product's characteristic is augmented in the product space