PRODUCT DIFFERENTIATION

RAGHU RAJ SINGH

NISHANT SINHA

SONAL BHARIJA

GEORGE P JOBY

SARANYA KOTA

Market:A place where buyers and sellers are brought into contact with each other and goods and services are exchanged. Today a market is any arena, however abstract or far-reaching, in which buyers and sellers make transactions.

Differences between Monopolistic market & Perfect Competition:Perfect Competition

Monopolistic Competition

Price Takers Pricing Competition P = MC

Price Makers Non-Pricing Competition P > MC

MonopolisticMarket:This refers to the case in which there are many sellers of a heterogeneous or differentiated product and entry into or exit from the industry is rather easy in the long run.

Characteristics of Monopolistic Market:

Price makers

. Barriers to entry are low

They act interdependently The demand curve slopes downwards

Reason for Downward Slope:-

Product differentiation

The efforts made by the firm to differentiate their products from other firms products in such a way that people value their product is called product differentiation.

It is a major activity of both existing firms as well as potential new firms.

It helps in increasing the profits of the firm.

Differentiated Products: Products The

that are similar but not identical.

similarity of these products arise from the fact that they satisfy the same basic consumption needs. Toothpaste and various brands of Breakfast cereals.

Ex:

Horizontal Differentiation:

When products are different according to features that can't be ordered in an objective way, a horizontal differentiation emerges in the market.
Horizontal differentiation can be linked to differentiation in colours (different colour version for the same good), in styles (e.g. modern / antique), in tastes. A typical example is the ice-cream offered in different tastes.

Vertical Differentiation:Vertical differentiation is the comparing of many products in a single market and ordering them from lowest to highest, according to their perceived quality. In other words, it is saying one product is better than another based on your own opinion. Perceived Difference Vertical differentiation is entirely dependent upon consumers' preferences and the differences that they perceive individually. Biased Perception Many consumers have a biased perception about a product due to advertisement, reviews, stated opinions of friends or family and past experiences.

Different Ways Product:

of

Differentiating

Physical differences Ex: Shampoos

Location Ex : convenience stores

Services Ex: Dominos pizza, Amazon books, toll free help lines.

Product image Ex : Advertisements

Equilibrium of the firm:-

Perceived & Proportional Demand curve:

Perceived demand curve is also known as Planned sales curve. In the above figure, dd is the more elastic perceived demand curve. In the above figure, DD is the less elastic proportional demand curve.