Determinants of product differentiation: A Survey

This paper reviews the Hotelling literature of product differentiation. The purpose of this work is to examine the impact of the market structure on price competitionand equilibrium differentiation. The existence of a general ’principle of differentiation’ is rejected. In contrast, differentiation depends on a number of market parameters such as the costs of disutility, the demand elasticity, the number of firms, the density of consumers, and so forth. It is argued that the analysis of thepredictive validity of this research stream by experimental and empirical studies isoverdue.