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Trade and Variety in a Model of Endogenous Product Differentiation

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Author Info
Oliver Lorz () (Faculty of Business and Economics, RWTH Aachen University, 52056 Aachen, Germany)
Matthias Wrede () (Faculty of Business Administration and Economics, University of Marburg, 35032 Marburg, Germany)

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Abstract

This paper sets up a model of endogenous product differentiation to analyze the variety effects of international trade. In our model multi-product firms decide not only about the number of varieties they supply but also about the degree of horizontal differentiation between these varieties. Firms can raise the degree of differentiation by investing variety-specific fixed costs. In this setting, we analyze how trade integration, i.e. an increase in market size, influences the number of firms in the market, the number of product varieties supplied by each firm, and the degree of differentiation.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/02-2009_Lorz.pdf
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Publisher Info
Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200902.

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Length: 13 pages
Date of creation: 2009
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200902

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Related research
Keywords: Product differentiation; multi-product firms; international trade.;

Other versions of this item:

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Allanson, Paul & Montagna, Catia, 2005. "Multiproduct firms and market structure: An explorative application to the product life cycle," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 587-597, September. [Downloadable!] (restricted)
  2. Carsten Eckel, 2006. "Trade and Diversity: Is There a Case for 'Cultural Protectionism?'," German Economic Review, Blackwell Publishing, vol. 7, pages 403-418, November. [Downloadable!] (restricted)
  3. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Volker Nocke & Stephen Yeaple, 2006. "Globalization and Endogenous Firm Scope," PIER Working Paper Archive 06-015, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
    Other versions:
  5. Irene Brambilla, 2006. "Multinationals, Technology, and the Introduction of Varieties of Goods," NBER Working Papers 12217, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2006. "Multi-Product Firms and Trade Liberalization," NBER Working Papers 12782, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Hélène Erkel-rousse, 1997. "Endogenous Differentiation Strategies, Comparative Advantage and the Volume of Trade," Annales d'Economie et de Statistique, ADRES, issue 47, pages 08, Juillet-S. [Downloadable!]
  8. Simon P. Anderson & André de Palma, 2003. "Market Performance With Multiproduct Firms," Virginia Economics Online Papers 357, University of Virginia, Department of Economics. [Downloadable!]
  9. Carsten Eckel, 2009. "Endogenous Sunk Costs, Flexible Manufacturing and the Productivity Effects of International Trade," Scandinavian Journal of Economics, Blackwell Publishing, vol. 111(2), pages 369-386, 06. [Downloadable!] (restricted)
  10. Carsten Eckel & J. Peter Neary, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Economics Series Working Papers 292, University of Oxford, Department of Economics. [Downloadable!]
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