Is electricity a homogeneous product?

Homogeneous and heterogeneous goods

Homogeneous vs. heterogeneous goods definition

Homogeneous goods (homogeneous: similar) are goods that - at least in the eyes of consumers - are the same and therefore interchangeable.


Electricity, gas or petrol are basically homogeneous goods; Consumers will never say "The electricity from one provider is better than the other" or something similar.

These are extreme examples, and a lot of food, paper, etc. are considered homogeneous products.

Heterogeneous goods (heterogeneous: different), on the other hand, are goods that differ and can only be exchanged to a limited extent.


All cars have the same function (mobility), but of course they differ in many points (design, quality, performance, etc.).

Likewise red wine, newspapers etc.

Companies try to position what are actually homogeneous goods heterogeneously, i.e. as distinguishable branded items (e.g. premium gasoline or organic products). This differentiation can take place through additional properties or quality features, services or an image associated with the product.

In the case of homogeneous goods, the price is much more important than in the case of heterogeneous goods ("The cheapest petrol station wins.").

In the case of heterogeneous goods, however, the company is more likely to pursue a price policy; the customer then has to estimate the price in relation to the service (he has nothing directly comparable).

Many (national) economic analyzes, models and premises refer to homogeneous goods, e.g. the consideration of oligopolies, the Stackelberg model, the Cournot model, the Bertrand model, the definition of the perfect market.

The risk of cartels (unauthorized agreements between competitors) in oligopoly markets (few suppliers share a market) is greater for homogeneous goods, as the price pressure makes it difficult for all companies in the sector and these hardly distinguish themselves through other measures (quality improvement, design, innovation) can.

Homogeneous goods can be traded well on stock exchanges, a share in company A is like another stock in company A and different types of crude oil are also traded on commodity exchanges.