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Product Differentiation

Suggest whether each of the following statements is true or false and illustrate why.

A. Sources of product differentiation include only physical differences, not merely perceived differences.
B. Price competition tends to be most vigorous for products with many actual or perceived differences.
C. The availability of good substitutes decreases the degree of competition.
D. Competition tends to be less vigorous when buyers and sellers have easy access to detailed price/product performance information.
E. The availability of good complements increases the degree of competition.

Solution Preview

A. Sources of product differentiation include only physical differences, not merely perceived differences.

False. If a consumer perceives a difference, they will pay for it. If two hair stylists are both excellent at cutting hair but one has a better personality, the customer might pay a bit more for their service.

B. Price competition tends to be most vigorous ...

Solution Summary

A sentence explains why each response was either not suitable or the right selection, with examples to make it clear.

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