Definition
Horizontal product differentiation takes place when, at a given price, different consumers prefer different varieties of the goods, so all varieties have a positive demand.
Horizontal Product Differentiation
A number of products are horizontally differentiated when, if they were all sold at an identical price, all of them would be demanded by one or more consumers. The existence of horizontal product differentiation implies that the market cannot be described by perfect competition but firms enjoy some degree of market power as, if one of the firms increased its price, some consumers would switch to a competitor but some other consumers would keep loyal to their original supplier.
From the point of view of law and economics, the existence of horizontal product differentiation is relevant in order to identify the competitors for a good and therefore to define the relevant market. The degree of product differentiation determines the degree of market power, as the more similar...
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Elizalde, J. (2021). Horizontal Product Differentiation. In: Marciano, A., Ramello, G.B. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7883-6_236-2
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DOI: https://doi.org/10.1007/978-1-4614-7883-6_236-2
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Latest
Horizontal Product Differentiation- Published:
- 23 March 2021
DOI: https://doi.org/10.1007/978-1-4614-7883-6_236-2
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Original
Horizontal Product Differentiation- Published:
- 26 June 2015
DOI: https://doi.org/10.1007/978-1-4614-7883-6_236-1