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Product Differentiation and Trade

Author

Listed:
  • Pi Jiancai
  • Fan Yanwei

    (Department of Economics, Nanjing University, Nanjing, P.R. China)

Abstract

This paper analyzes the impacts of product differentiation in general oligopolistic equilibrium with trade. With constant wages, when product differentiation increases, the extensive margins of home and foreign exports decrease, and the domestic and foreign scopes of variety in each industry increase unambiguously. However, the impact of product differentiation on the labor requirement of each firm is mixed. In general equilibrium, an increment of product differentiation increases the wage rate unambiguously if the total variety of goods is large enough in all industry. However, if all firms are single-product ones, an increment of product differentiation increases the wage rate unambiguously in general equilibrium.

Suggested Citation

  • Pi Jiancai & Fan Yanwei, 2024. "Product Differentiation and Trade," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(1), pages 235-261, January.
    • Handle: RePEc:bpj:bejtec:v:24:y:2024:i:1:p:235-261:n:14
    DOI: 10.1515/bejte-2023-0016
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    More about this item

    Keywords

    product differentiation; multi-product firms; single-product firms; trade; general oligopolistic equilibrium;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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