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Multiproduct Firms, Income Distribution, and Trade

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  • Marcia M Schafgans
  • Joachim Stibora

Abstract

We develop a general equilibrium model of multiproduct fi rms with quality differentiated goods. Households are characterized by an heterogeneous taste for the differentiated good and their income level. The use of non-homothetic preferences and vertical product differentiation (product quality) enables us to analyze how distributional changes in income affect the number of vertically differentiated firms, their product range and prices in the presence of strategic interaction across rms. The implications of lowering the barriers to trade within this setting are considered as well.

Suggested Citation

  • Marcia M Schafgans & Joachim Stibora, 2014. "Multiproduct Firms, Income Distribution, and Trade," STICERD - Economics of Industry Papers 52, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieip:52
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    References listed on IDEAS

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    1. Swati Dhingra, 2013. "Trading Away Wide Brands for Cheap Brands," American Economic Review, American Economic Association, vol. 103(6), pages 2554-2584, October.
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    5. Pablo Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2011. "Income Distribution, Product Quality, and International Trade," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 721-765.
    6. Justin P. Johnson & David P. Myatt, 2003. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," American Economic Review, American Economic Association, vol. 93(3), pages 748-774, June.
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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