Quality Uncertainty Mitigates Product Differentiation

I present the idea that imperfect information about the (vertical) quality characteristics of goods reduces the sellers' incentives for horizontal product differentiation. As a result, the equilibrium outcome may be characterized by "minimum differentiation." In a spatial framework this implies that firms tend to choose head-on competition by agglomerating at the same location. It may happen that consumers benefit from imperfect information about product quality.