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Verti-zontal differentiation in export markets

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

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

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.

Date: 2013-12
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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 (2014) Downloads
Working Paper: Verti-zontal differentiation in export markets (2013) Downloads
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