Product Differentiation In Monopoly. Product differentiation through the above methods helps firms to acquire a certain degree of loyalty for their products from the customers. Products in the market are differentiated solely on the price factor.
Nevertheless, product differentiation can also be a way to avoid or to create entry barriers and thus become a source of competitive advantage. Under monopolistic competition, product differentiation has great influence over a firm’s equilibrium. Product differentiation is the means used by a firm in a monopolistic competitive market with many firms selling similar products to differentiate its product from that of other.
