Imperfect Competition

Abstract

Competition is said to be imperfect when products are differentiated in some way. Products are differentiated either because they are real or imaginary differences between them. Real differences might be based on the use of different additives to produce a product or on slight differences in design. Imaginary differences are created through advertising which highlights some desirable, though indefinable quality a product purports to possess but which is not possessed by other products. In the case of real differences between products, advertising is used to reinforce differentiation.