ABSTRACT
Providing a firm can manage to differentiate its product or service from other similar products – even if only slightly – it can gain some control over the price it charges. Firms producing a differentiated product are able to achieve some independence from their competitors in the industry. They should be able to raise their prices, and thereby increase profits, without losing all their customers. Unlike firms operating at the perfectly competitive extreme, they face a slightly downward sloping demand curve. In fact, the greater a firm’s success at product differentiation, the greater the firm’s pricing options – and the steeper the demand curve.
