We consider a duopoly stage game where an incumbent sells a high‐quality product while enjoying an ample production capacity. We study the quality–capacity best response of an entrant, before price competition takes place. We partially characterize equilibrium prices and payoffs in the corresponding Bertrand–Edgeworth pricing games and show that the entrant tends to rely exclusively on capacity limitation in a subgame perfect equilibrium, thereby showing that vertical differentiation is not robust to Bertrand–Edgeworth competition.