Final answer:
Private-label products are those manufactured by one company for sale under another company's brand, often at a lower price. They engage in monopolistic competition and can differentiate themselves in several ways such as product characteristics or brand perception. A strong brand name is a significant asset in the market.
Step-by-step explanation:
Private-label products, also known as store brands or in-house brands, are products that are manufactured by one company for sale under another company's brand. These are typically sold at lower prices compared to national brands. In an environment of monopolistic competition, where companies can gain a mini-monopoly due to product differentiation, private-label products provide an alternative to name brands like Coca-Cola or Quaker Oats.
Product differentiation is a strategy where a firm tries to distinguish its products from the competitors'. This can be achieved through various means such as unique physical aspects, exclusive location, intangible aspects such as customer service, or brand perception. A well-respected brand name, like Coca-Cola, is an example of a differentiated product that has been built up over many years and offers a competitive edge in the marketplace.
Private-label products can benefit consumers as they often lead to more options and lower prices due to increased competition. Companies that offer consistent quality and protect their brands tend to establish a strong reputation, which in turn becomes a valuable asset.