Question

List as many reasons as you can for why a firm would want to differentiate its products from its competitors. Why might a firm choose a product similar to its competitor?

Answer 1

Product differentiation is selling similar goods with slight difference from others in the competition.
Reasons are:
1. Creating identity and brand image
2. To gain market share
3. To gain pricing power
4. Able to compete in the market

By choosing a similar good it helps firms to easily enter in to market and gain share in the competitors market by pricing competitively. Here the market would be of monopolistic and established in nature which makes easy to understand and design strategies to compete.