We develop a two-stage model for versioning products with respect to both vertical and horizontal attributes. At first, a firm positions its top-quality “flagship” product in a market with an imperfectly known distribution of tastes and reservation prices. In the second stage, the firm learns these consumer characteristics and has the option of extending its product line by versioning the flags...

While homogenous goods is a convenient assumption for many models, it is frequently violated in practice. Many markets feature goods that are not identical, they vary in quality, features, reliability, reputation and/or geographic location. Indeed, markets of literally identical goods seem to be relatively rare, especially once differences in seller’s locations and reputations are taken into ac...