differentiation

Examples of differentiation in the following topics:

• Product Differentiation

  • Oligopolies can form when product differentiation causes decreased competition within an industry.
  • Product differentiation (or simply differentiation) is the process of distinguishing a product or service from others, to make it more attractive to a particular target market.
  • This involves differentiating it from competitors' products as well as a firm's own products.
  • Differentiation is due to buyers perceiving a difference; hence, causes of differentiation may be functional aspects of the product or service, how it is distributed and marketed, or who buys it.
  • The major sources of product differentiation are as follows:

• Product Differentiation

  • Although research in a niche market may result in changing a product in order to improve differentiation, the changes themselves are not differentiation.
  • Simple: the products are differentiated based on a variety of characteristics;
  • Differentiation occurs because buyers perceive a difference.
  • The major sources of product differentiation are as follows:
  • Differentiation affects performance primarily by reducing direct competition.

• Compensation Differentials

  • Some differences in wage rates across places, occupations, and demographic groups can be explained by compensation differentials.
  • The compensation differential ensures that individuals are willing to invest in their own human capital.
  • Not to be confused with a compensation differential, a compensating differential is a term used in labor economics to analyze the relation between the wage rate and the unpleasantness, risk, or other undesirable attributes of a particular job.
  • One can also speak of the compensating differential for an especially desirable job, or one that provides special benefits, but in this case the differential would be negative: that is, a given worker would be willing to accept a lower wage for an especially desirable job, relative to other jobs. .
  • Hazard pay is a type of compensating differential.

• Introduction to Firms with "Market Power"

  • If their product is (or can be differentiated), consumers may have a preference for one firm's output relative to others.
  • In many cases some producers try to differentiate their products.
  • If the firm has is no opportunity to differentiate their product they have no incentive to advertise and to try to influence the demand for their product.
  • If a product can be differentiated by altering the characteristics of the good or simply by convincing the consumers that the product is different, the firm achieves market power.
  • Advertising can be used to differentiate a product or increase the demand for a product.

• Definition of Perfect Competition

  • Market structure is determined by the number and size distribution of firms in a market, entry conditions, and the extent of product differentiation.
  • Monopolistic competition: A market structure in which there is a large number of firms, each having a small portion of the market share and slightly differentiated products.
  • Oligopoly: An industry structure in which there are a few firms producing products that range from slightly differentiated to highly differentiated.

• Defining Monopolistic Competition

  • Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another.
  • Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location).
  • have products that are highly differentiated, meaning that there is a perception that the goods are different for reasons other than price;
  • The clothing industry is monopolistically competitive because firms have differentiated products and market power.

• Advertising and Brand Management in Monopolistic Competition

  • Advertising and branding help firms in monopolistic competitive markets differentiate their products from those of their competitors.
  • One of the characteristics of a monopolistic competitive market is that each firm must differentiate its products.
  • Reputation among consumers is important to a monopolistically competitive firm because it is arguably the best way to differentiate itself from its competitors.

• Demand Curve

  • The source of the market power is that there are comparatively fewer competitors than in a competitive market, so businesses focus on product differentiation, or differences unrelated to price.
  • By differentiating its products, firms in a monopolistically competitive market ensure that its products are imperfect substitutes for each other.

• Defining Monopoly

  • However, there are noticeable differences between the two market structures including: marginal revenue and price, product differentiation, number of competitors, barriers to entry, elasticity of demand, excess profits, profit maximization, and the supply curve.

• Imperfect Competition and Monopolistic Competition

  • Relaxing the characteristic of outputs from homogeneous to "differentiated products" was the basic change from the purely competitive market model.
  • The differentiation of output results in the demand faced by each seller being less than perfectly elastic.