Abstract: Aiming at the problem that the traditional Hotelling segmentation model was assumed that the production costs of duopoly enterprises are completely the same, with the two-phase gaming model applied to it, a locating-pricing model is proposed for both enterprises at different costs. The results show that when the difference the products of the same quality supplied by the duopoly enterprises is maximized, the enterprise which is superior in cost to the other one will gain more excess profit though both can gain profit. However, when the difference is minimized, the enterprise superior in cost will be dominant on market and the inferior one has to fall far behind the former even retreat from the market.