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Endogenous Differentiation Strategies, Comparative Advantage and the Volume of Trade

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  • Hélène Erkel-Rousse

Abstract

We present a trade model in which producer differentiation strategies are endogenous. Firms can influence the brand image of their products through a trade-off between cost and product quality. Comparative advantage depends on both variable costs and the ratio of perceived product quality to total costs. Firms sell either a small range of standard varieties or a large range of more expensive high-quality varieties. Empirical trade equations including differentiation variables are derived from this model.

Suggested Citation

  • Hélène Erkel-Rousse, 1997. "Endogenous Differentiation Strategies, Comparative Advantage and the Volume of Trade," Annals of Economics and Statistics, GENES, issue 47, pages 121-149.
    • Handle: RePEc:adr:anecst:y:1997:i:47:p:121-149
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    File URL: http://www.jstor.org/stable/20076085
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    Cited by:

    1. Tito Boeri & Joaquim Oliveira-Martins, 2002. "Transition, variété des produits et intégration économique," Economie & Prévision, La Documentation Française, vol. 0(1), pages 55-69.
    2. Matthieu Crozet & Hélène Erkel‐Rousse, 2004. "Trade Performances, Product Quality Perceptions, and the Estimation of Trade Price Elasticities," Review of International Economics, Wiley Blackwell, vol. 12(1), pages 108-129, February.
    3. Hélène Erkel‐Rousse & Daniel Mirza, 2002. "Import price elasticities: reconsidering the evidence," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(2), pages 282-306, May.
    4. Lorz Oliver & Wrede Matthias, 2009. "Trade and Variety in a Model of Endogenous Product Differentiation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-14, November.
    5. Cepii & Cepremap, 2001. "MARMOTTE : a Multinational Model," Working Papers 2001-15, CEPII research center.
    6. Hélène Erkel-Rousse & Françoise Le Gallo, 2002. "Compétitivités prix et qualité dans le commerce international : une analyse empirique des échanges de 12 pays de l’OCDE," Économie et Prévision, Programme National Persée, vol. 152(1), pages 93-113.
    7. Karine Hervé, 2001. "Estimations des élasticités du commerce extérieur sur l’ensemble des biens et services pour un panel de 17 pays," Économie et Prévision, Programme National Persée, vol. 147(1), pages 19-36.

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