structural:scholar_edition
Implications of product differentiation

Product differentiation within a given market segment can have both positive and negative affects on the consumer. From the producers perspective building a different product compared to competitors can create a competitive advantage which can result in higher profits. Through differentiation consumers gain greater value from a product, however this leads to increased demand and market segmentation which can cause anti-competitive effects on price. From this perspective greater diversity leads to more choices which means each individual can purchase a product better suited to themselves, the negative to this is prices within the market segment tend to rise. The level of differentiation between goods can also affect demand. For example within grocery stores, If a category of goods is relatively nondifferentiated then a high amount of assortment depth leads to less sales.