Up to this point, we have assumed that products are differentiated in a way that corresponds to some real desire of consumers. There is real convenience in having a gas station in your neighborhood; Chinese food and Mexican food are really different from each other.

In the real world, however, some instances of product differentiation can seem puzzling if you think about them. What is the real difference between Crest and Colgate toothpaste? Between Energizer and Duracell batteries? Or a Marriott and a Hilton hotel room? Most people would be hard-pressed to answer any of these questions. Yet the producers of these goods make considerable efforts to convince consumers that their products are different from and better than those of their competitors.

No discussion of product differentiation is complete without spending at least a bit of time on the two related issues—and puzzles—of advertising and brand names.