Price as an Indicator for Quality in International Trade?

Jørgen Drud Hansen () and Nielsen, Jørgen Ulff-Møller ()
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Jørgen Drud Hansen: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark, http://www.asb.dk/staff.aspx?pid=11467
Nielsen, Jørgen Ulff-Møller: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark, http://www.asb.dk/staff.aspx?pid=11447

No 08-18, Working Papers from University of Aarhus, Aarhus School of Business, Department of Economics

Abstract: This paper examines the relation between price differences and quality differences in an oligopoly model with intra-industry trade, where goods are horizontally as well as vertically differentiated. The analysis demonstrates that the ratio of prices is not linked to the ratio of qualities in any simple way. The paper therefore questions empirical trade studies using unit values as an indicator for the quality of the traded goods.

Keywords: Horizontal product differentiation; Vertical product differentiation; Intraindustry trade; Price ratio; Quality ratio; Unit values (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2008-01-01

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