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Price as an Indicator for Quality in International Trade?




This paper examines the relation between price differences and quality differences in an oligopoly model with intra-industry trade, where goods are horizontally as well as vertically differentiated. The analysis demonstrates that the ratio of prices is not linked to the ratio of qualities in any simple way. The paper therefore questions empirical trade studies using unit values as an indicator for the quality of the traded goods.

Suggested Citation

  • Hansen, Jørgen Drud & Nielsen, Jørgen Ulff-Møller, 2008. "Price as an Indicator for Quality in International Trade?," Working Papers 08-18, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2008_018

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    References listed on IDEAS

    1. Anne Bolster & Simon Burgess & Ron Johnston & Kelvyn Jones & Carol Propper & Rebecca Sarker, 2007. "Neighbourhoods, households and income dynamics: a semi-parametric investigation of neighbourhood effects," Journal of Economic Geography, Oxford University Press, vol. 7(1), pages 1-38, January.
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    More about this item


    Horizontal product differentiation; Vertical product differentiation; Intraindustry trade; Price ratio; Quality ratio; Unit values;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations


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