Literary Fiction? Really?
I've followed this thread with some interest, as my current WIP is hard to classify either of the two. After all is said and done, I think they (Those that KNOW) make it up on the fly, depending upon which market analysis guru they're having lunch with.
As a writer, I write the best story I can. It's supposed to entertain and absorb the reader. I also write to satisfy my own intellectual needs and for the challenge. Now, when it is shaped up enough to publish, a whole different set of tools and determinations have to kick in. Publishing is not about art, publishing is a business designed to make a profit from the right product. Unless a writer has spent time in that world; as in, deriving a paycheck, then they need to defer to those that work there.
If that means they'll take my (hopefully literary) novel and call it commercial, after a few months of tweaking, I don't care much, as my main reward was in the writing part of the project. On the other hand, were I to decide to write a "best-seller" I guess I'd have to do some market research first...