Endogenous Differentiation Strategies, Comparative Advantage and the Volume of Trade

Hélène Erkel-Rousse

Annals of Economics and Statistics, 1997, issue 47, 121-149

Abstract: We present a trade model in which producer differentiation strategies are endogenous. Firms can influence the brand image of their products through a trade-off between cost and product quality. Comparative advantage depends on both variable costs and the ratio of perceived product quality to total costs. Firms sell either a small range of standard varieties or a large range of more expensive high-quality varieties. Empirical trade equations including differentiation variables are derived from this model.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1997:i:47:p:121-149

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