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Verti-zontal differentiation in export markets

Francesco Di Comite, Jacques Thisse () and Hylke Vandenbussche ()

Journal of International Economics, 2014, vol. 93, issue 1, 50-66

Abstract: Many trade models of monopolistic competition identify cost efficiency as the main determinant of firm performance in export markets. To date, the analysis of demand factors has received much less attention. We propose a new model where consumer preferences are asymmetric across varieties and heterogeneous across countries. The model generates new predictions and allows for an identification of horizontal differentiation (taste) clearly distinguished from vertical differentiation (quality). Data patterns observed in Belgian firm–product level exports by destination are congruent with the predictions and seem to warrant a richer modelling of consumer demand.

Keywords: Heterogeneous firms; Heterogeneous consumers; Horizontal differentiation; Vertical differentiation; Asymmetric preferences; Monopolistic competition (search for similar items in EconPapers)
JEL-codes: D43 F12 F14 L16 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Verti-zontal differentiation in export markets (2014) Downloads
Working Paper: Verti-zontal differentiation in export markets (2013) Downloads
Working Paper: Verti-zontal differentiation in export markets (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:93:y:2014:i:1:p:50-66

DOI: 10.1016/j.jinteco.2014.01.010

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