In this chapter we explore a variant of the Hotelling’s model which makes it possible to nest horizontal and vertical differentiation into a unified setup whose key parameter is the relative natural market size of the firms. Here the natural market of a firm consists of the set of consumers who prefer the variant of this firm to the variant offered by the other firm at equal prices. In this setup, equilibrium prices increase whenever the population’s disparity decreases. We also explore the properties of the model in the case of entry by a vertically differentiated product into an otherwise horizontally differentiated industry.