IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/18184.html

Love-for-Variety: with an application to an Armington model of competitive trade

Author

Listed:
  • Matsuyama, Kiminori
  • Ushchev, Philip

Abstract

We define and characterize love-for-variety, which measures the consumer’s desire to consume more variety of goods, first for general homothetic symmetric preferences, and then for the two classes of GM-CES and the three classes of HSA/HDIA/HIIA. These five classes are pairwise-disjoint with the sole exception of CES. If we depart from CES within GM-CES, the standard CES measure of love-for-variety underestimates the true love-for-variety, potentially by a wide margin. If we depart from CES within HSA/HDIA/HIIA by introducing the 2nd law of demand, the standard CES measure overestimates the true love-for-variety. We illustrate these and other results in an Armington model of competitive trade, where countries differ in the variety of goods they produce, and we show how the ACR formula for the gains from trade needs to be modified.

Suggested Citation

  • Matsuyama, Kiminori & Ushchev, Philip, 2023. "Love-for-Variety: with an application to an Armington model of competitive trade," CEPR Discussion Papers 18184, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:18184
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP18184
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:18184. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.