ARE MARKETS MORE COMPETITIVE IF COMMODITIES ARE CLOSER SUBSTITUTES

Equilibrium prices of the variants of a differentiated commodity are s hown to increase, if the Variants become closer substitutes, under a s et of circumstances which is by no means pathological. Rather, the und erlying argument has a bearing on market prices, whenever a potential buyer does not know with certainty the characteristics of the variants which are for sale before inspecting them and therefore has to incur some information costs before the final purchase decision.