(They concluded that) when more downstream brands choose one
brand, more upstream firms will specialize in the input specific to
that brand, and vice versa. Hence, multiple equilibria are possible and
the softening effect of brand differentiation on competition might not
be strong enough to induce maximal differentiation" (and, thus, minimal
competition).
Both scholars and laymen often mix their terms.
Competition does not necessarily translate either to variety or to
lower prices. Many consumers are turned off by too much choice. Lower
prices sometimes deter competition and new entrants. A multiplicity of
vendors, retail outlets, producers, or suppliers does not always foster
competition. And many products have umpteen substitutes. Consider films
- cable TV, satellite, the Internet, cinemas, video rental shops, all
offer the same service: visual content delivery.
And then there is the issue of technological standards. It is
incalculably easier to adopt a single worldwide or industry-wide
standard in an oligopolistic environment. Standards are known to
decrease prices by cutting down R&D expenditures and systematizing
components.
Or, take innovation. It is used not only to differentiate one's
products from the competitors' - but to introduce new generations and
classes of products.
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