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The major sources of product differentiation are as follows. Differences in quality which are usually accompanied by differences in price; Differences in functional features or design; Ignorance of buyers regarding the essential characteristics and qualities of goods they are purchasing; Sales promotion activities of sellers and, in particular ...
Differentiation drives profitability when the added price of the product outweighs the added expense to acquire the product or service but is ineffective when its uniqueness is easily replicated by its competitors. [6] Successful brand management also results in perceived uniqueness even when the physical product is the same as competitors.
Examples are Cournot oligopoly, and Bertrand oligopoly for differentiated products. Bain's (1956) original concern with market concentration was based on an intuitive relationship between high concentration and collusion which led to Bain's finding that firms in concentrated markets should be earning supra-competitive profits.
Perfect competition refers to a type of market where there are many buyers and sellers that feature free barriers to entry, dealing with homogeneous products with no differentiation, where the price is fixed by the market. Individual firms are price takers [3] as the price is set by the industry as a whole. Example: Agricultural products which ...
Measures of concentration summarise the share of market or industry activity accounted for by large firms. An advantage of using concentration as an empirical tool to quantify market power is the requirement of only needing revenue data of firms which results in the corresponding disadvantage of the inconsideration of costs or profits. [35]
The main difference between price competition and non-price competition would be the traditional case of which price competition exists in homogenous products where products are very difficult to be differentiated and can only be produced in minimal forms. Such circumstances would result in firms competing with prices, leading to price wars ...
A point of difference is a factor of products or services that establishes differentiation. Differentiation is the way in which the goods or services of a company differ from its competitors . Indicators of the point of difference's success would be increased customer benefit and brand loyalty .
Imperfect (or 'differentiated') oligopolies, on the other hand, involve firms producing commodities which are heterogenous. Where companies in an industry need to offer a diverse range of products and services, such as in the manufacturing and service industries, [12] such industries are subject to imperfect oligopoly. [13]