Verti-zontal differentiation in monopolistic competition

Francesco Di Comite, Jacques Thisse and Hylke Vandenbussche

No 216, Working Paper Research from National Bank of Belgium

Abstract: 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 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2011-10
New Economics Papers: this item is included in nep-bec, nep-com and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Verti-zontal Differentiation in Monopolistic Competition (2012)
Working Paper: Verti-zontal 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:nbb:reswpp:201110-216

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