Quality uncertainty mitigates product differentiation

I present the idea that imperfect information about the (vertical) quality characteristics of goods reduces the sellers' incentives for horizontal pro duct differentiation. As a result, the equilibrium outcome may be character ized by "minimum differentiation." In a spatial framework this implies that firms tend to choose head-err competition by agglomerating at the same loc ation. It may happen that consumers benefit from imperfect information abou t product quality.