The text so far has focused on how prices and quantities are determined in markets. But firms also can get to choose the nature of the products they offer to consumers. Television networks can air comedies or dramas or news programs, farmers can grow different strains of wheat, barbers can cut hair in different styles, automobile manufacturers can offer sedans or sports utility vehicles.

Firms have two main dimensions of choice in determining the nature of the product: what level of quality to offer, and how much variety. Quality, to be taken up in the first section of the chapter, is something that all consumers want and agree on. Durability, reliability, and safety are always desirable. In contrast, variety, the topic of the second section of the chapter, is a matter of taste. Some people like red roses, some pink, some white; some prefer conservative clothing, others want flash and novelty.

QUALITY

Products vary in many quality dimensions. For simplicity, suppose all consumers are seeking some single service feature from a product. For light bulbs it might be lumens of light output, for hard disks it might be gigabyte capacity, for gasoline it might be mileage.