This paper analyses the properties of a model of imperfect competition in conjunction with a preference for product variety. When the consumer treats product variety as parametric, a tax scheme is described that generates a socially optimal equilibrium from market behaviour. Welfare-improving and optimal commodity taxes are also discussed. An alternative, conjectural, definition of equilibrium is introduced; for a single consumer model this is argued to result in greater variety and utility. If further consumers are introduced, variety causes externalities in consumption; their effects are analysed and policies to overcome these discussed.