Product differentiation
Vertical product differentiation can be measured objectively by a consumer, for example when comparing two similar products the quality and price can clearly be identified and ranked by the customer. If both A and B products are charged the same price to the consumer, then the market share for each one will be positive, according to the Hotelling model. The major theory in this is all consumers prefer the higher quality product if two distinct products are offered at the same price. A product can differ in many vertical attributes such as its operating speed. What really matters is the relationship between consumers willingness to pay for improvements in quality and the increase in cost per unit that comes with such improvements. Therefore, the perceived difference in quality is different with different consumer, so it is objective. A green product might be having a lower or zero negative effect on the environment, however, it may turn out to be inferior than other products in other aspects. Hence, it also depends on the way it is advertised and the social pressure a potential consumer is living in. Even one vertical differentiation can be a decisive factor in purchasing.