Hairdressers' services may be differentiated in other ways as well. Their styles may be different; the decor of the salon may be different, and that may make a difference for some customers; and even the quality of the conversation may make a difference. Somebody's political ideas may not fit with the hairdresser's. For example if the hairdresser is outspoken Republican you can not stay silent against him. And it's not a good idea to get into a controversy with one's haircutter.
Product Differentiation.
The word "industry" was put in quotes, when it referred to a group of firms with product differentiation. That's because the boundaries of the industry become much more indefinite when we talk about product differentiation. A hairdresser in Miami Downtown and another in Aventura may be pretty close substitutes, but the Miami hairdresser's service will be a very poor substitute for the services of a hairdresser in Orlando. Are they in the same industry? Or should we think of hairdressing industries as localized, so that Miami hairdressing is a different industry than Orlando hairdressing? And, too; barbers may cut women's hair, and hairdressers may cut men's hair. Are hairdressers and barbers part of the same industry, or different industries? There really is no final answer to this question, and some economists have avoided any reference to industries in dealing with monopolistic competition. Instead they talk about "product groups." A product group is a group of firms selling products that are "good," but not necessarily "perfect" substitutes. And, of course, a product group is not unique, since it depends on how "good" we require the substitutes to be, so there will be broader and narrower product groups. Coke and Pepsi are both members of the product group "cola drinks," while Coke, Dr. Pepper, Sprite and Squirt are members of the broader product group "carbonated soft drinks.".
This illustrates another point.
