Heterogeneous Firms, Quality, and Trade

Alexis Antoniades

Journal of International Economics, 2015, vol. 95, issue 2, 263-273

Abstract: We present a simple and tractable trade model of heterogeneous firms, endogenous quality choice, and endogenous markups. A key feature of the model is that competition not only lowers the cost cut-off between the firms that produce and those that exit, but it also raises the scope for quality differentiation. With both these channels present, the most productive firms respond to competition by raising quality, prices, and markups, while the least productive either exit or respond in the exact opposite manner.

Keywords: Intra-industry trade; firm heterogeneity; qualilty choice; non-constant markups; quality ladders (search for similar items in EconPapers)
JEL-codes: F12 O14 O47 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (99)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:95:y:2015:i:2:p:263-273

DOI: 10.1016/j.jinteco.2014.10.002

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