Product differentiation, firm heterogeneity and international trade: Exploring the Alchian-Allen effect

Luciana Echazu ()

Research in Economics, 2009, vol. 63, issue 2, 95-101

Abstract: In a model of international trade with horizontally differentiated goods, increasing returns and monopolistically competitive markets, this paper proposes that the degree of differentiation in a product mix-defined as the ratio of the number of varieties to the total value of imports-can be regarded as another aspect of quality. Furthermore, this paper draws a parallel to the Alchian-Allen effect and shows that, when firms are heterogeneous in either fixed or variable costs, the degree of differentiation is increasing in per unit transportation costs.

Keywords: Product; differentiation; Firm; heterogeneity; International; trade; Quality (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:63:y:2009:i:2:p:95-101

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