of satisfaction or money back, a reputation for high quality, services like free delivery, or offering a loan to

purchase the product. Finally, product differentiation may occur in the minds of buyers. For example, many

people could not tell the difference in taste between common varieties of ketchup or mayonnaise if they were

blindfolded but, because of past habits and advertising, they have strong preferences for certain brands.

Advertising can play a role in shaping these intangible preferences.

The concept of differentiated products is closely related to the degree of variety that is available. If everyone in

the economy wore only blue jeans, ate only white bread, and drank only tap water, then the markets for

clothing, food, and drink would be much closer to perfectly competitive. The variety of styles, flavors, locations,
and characteristics creates product differentiation and monopolistic competition.

Perceived Demand for a Monopolistic Competitor
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