The effect of product differentiation is to:
A)start a price war.
B)reduce prices to the noncooperative level.
C)reduce the intensity of competition among the firms in the oligopoly.
D)increase the intensity of competition among the firms in the oligopoly.

Question

Quizplus · Accepted Answer

Product differentiation allows firms to establish a unique market position and customer loyalty, which reduces the intensity of competition among the firms in the oligopoly. This is because customers may be willing to pay a premium for the unique features or qualities offered by a particular firm, rather than switching to a competitor. As a result, firms may be able to charge higher prices and earn higher profits, without engaging in a price war or lowering prices to the noncooperative level.

The Effect of Product Differentiation Is To