username3896148
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How does differentiating products affect the market competition?
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MindMax2000
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(Original post by libby341)
How does differentiating products affect the market competition?
In the business sense, you will create a 'mini monoply' for your product where you can be more rent seeking instead of being subject to market trends and its whims. It's like how Coca-Cola is able to charge higher prices than standard supermarket coke.
It can mean you can be less competitive than competitiors on price, but at the same time you need to be competitive in your branding and advertising.

In economics, being able to differentiate your product means you can discriminate your pricing better and get better share of the consumer surplus (see supply and demand diagrams).
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stephsmhb
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(Original post by username3896148)
How does differentiating products affect the market competition?
This is a form of non price competition. Differentiating products successfully will give that firm a competitive advantage over rivals which will allow them to charge higher prices/ make more sales, increasing profit and market share. By differentiating the product using branding, loyalty schemes and other marketing techniques the firm aims to create brand loyalty which will decrease the PED for their product, allowing them to charge higher prices and become more profitable, making it harder for rival firms to compete.

Hope that helps!
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