Verti-zontal Differentiation in Monopolistic Competition
Francesco Di Comite,
Jacques Thisse () and
Hylke Vandenbussche ()
No 322, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano
The recent availability of trade data at a firm-product-country level calls for a new generation of models able to exploit the large variability detected across observations. By developing a model of monopolistic competition in which varieties enter preferences non-symmetrically, we show how consumer taste heterogeneity interacts with quality and cost heterogeneity to generate a new set of predictions. Applying our model to a unique micro-level dataset on Belgian exporters with product and destination market information, we find that heterogeneity in consumer tastes is the missing ingredient of existing monopolistic competition models necessary to account for observed data patterns.
Keywords: Heterogeneous firms; Product Differentiation; Monopolistic Competition; Nonsymmetric varieties (search for similar items in EconPapers)
JEL-codes: D43 F12 F14 L16 (search for similar items in EconPapers)
Date: 2011-10-17, Revised 2011-10-17
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-int
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Working Paper: Verti-zontal Differentiation in Monopolistic Competition (2012)
Working Paper: Verti-zontal Differentiation in Monopolistic Competition (2011)
Working Paper: Vert-zonal Differentiation in Monopolistic Competition (2011)
Working Paper: Verti-zontal differentiation in monopolistic competition (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:322
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