Question

What is product differentiation?  Give examples.  How does product differentiation influence buyer and supplier behaviors?  How does product differentiation influence your behavior?

Answer 1

Product differentiation is a way to differentiate your products from others. It basically means how can we differentiate our products from others sellers. Products can be differentiated by having different characteristics of them. For example, nowadays different laptops are available in the market. All of them differ from each other in some characteristic. They have different screen size, appearance etc. Product differentiation influences buyer behaviors as all buyers have different preferences. These different preferences are satisfied by different characteristics of products. Hence in this way, a buyer maximizes his utility. Similarly, a product differentiation influences a seller to produce a product with such unique features which are not present in other products of the same category. Hence it helps them to set up a monopoly. Product differentiation also helps me as a consumer to differentiate between various products available and hence choose the one which maximizes my utility.