King Rat (gkr) wrote,
King Rat

Eco 200: product differentiation

(group) The attempt by sellers to make their product more attractive to consumers is sometimes called product differentiation.

  1. Is product differentiation a wasteful process, imposing costs on sellers that are greater than the benefits conferred on buyers? Think of cases where it probably is wasteful in this sense and other cases where it is not.

    Product differentiation can be used to identify quality products. For instance, my employer brands many hotels we sell as Expedia Special Rate. While the hotel room you get is exactly the same as one sold elsewhere, it tells the consumer that we guarantee the price is the lowest (or the difference back). A bad use of product differentiation could be viewed as branded bottled water. All bottled waters are essentially the same. The government doesn't allow these products to be different really. On the other hand, even if the product isn't different, if it gives the customer piece of mind that the company isn't trying to get around government regulations, then it's still a small benefit in less fretting.

    I personally look at all branding skeptically, but then I have a huge distrust for corporations.

  2. Evaluate the following argument: New practices initiated by sellers to differentiate their products are liable to be wasteful from the social point of view. But this only means that producers have already made use of the low-cost/high-benefit techniques of product differentiation; it does not show that the whole proces of product differentiation is wasteful.

    Generally I agree with the statement. I prefer product differentiation based on actual product differences rather than based on marketing product without much actual difference.


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