<P> When products can't be ordered in an objective way and are different in one or all of its features, then there is horizontal differentiation . For example, different color versions of the same iPhone or MacBook . A lemon ice - cream is not superior than a chocolate ice - cream, is completely based on the user's preference . A restaurant may price all of its desserts are the same price and lets the consumer to freely choose its preferences since all the alternatives cost the same . </P> <P> According to a research conducted by combining mathematics and economics, decisions of pricing depends on the substitutability between the products depends to the degree of how much differentiated the firms' products are . No firm can charge a higher price if the products are good substitutes and vice-versa . The lower non-cooperative equilibrium price the lower the differentiation . For this reason, firms might jointly raise prices above the equilibrium or competitive level by coordination between themselves . They have a verbal or written collusion agreement between them . Firms operating in a market of low product differentiation might not coordinate with others, which increases the incentive to cheat the collusion agreement . On the contrast, even by slightly lowering the prices, a firm can capture large fraction of the market and obtain short term profits with highly substitutable products . </P> <P> During the 1990's, steps taken by government on deregulation and European integration persuaded banks to compete for deposits on many factors like deposit rates, accessibility and the quality of financial services . </P> <P> In this example using the Hotelling model, one feature is of variety (location) and one feature of quality (remote access). Remote access using bank services via postal and telephonic services like arranging payment facilities and obtaining account information). In this model, banks cannot become vertically differentiated without negatively affecting horizontal differentiation between them . </P>

In the context of tourism marketing what does 'differentiation' refer to