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Verti-zontal differentiation in export markets

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

No 1680, Working Paper Series from European Central Bank

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. JEL Classification: D43, F12, F14, L16

Keywords: asymmetric preferences; heterogeneous consumers; heterogeneous firms; monopolistic competition; product differentiation (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-bec and nep-int
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Related works:
Journal Article: Verti-zontal differentiation in export markets (2014) Downloads
Working Paper: Verti-zontal differentiation in export markets (2014)
Working Paper: Verti-zontal differentiation in export markets (2013) Downloads
Working Paper: Verti-zontal differentiation in export markets (2013) Downloads
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