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DTSTART:20251102T020000
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DESCRIPTION:Trade Development and Political Economy Presents: Hylke Vandenb
 ussche Verti-zontal Differentiation in Monopolistic Competition Modern Exi
 sting trade models that guide empirical research do not seem to perform we
 ll in explaining firm-product level prices and sales. In response to this 
 growing evidence\, this paper aims to generalize a model of quadratic pref
 erences in a way not done previously. Starting from a model with cost and 
 quality differences\, we argue that an important source of heterogeneity\,
  overlooked in the existing trade models\, is the heterogeneity of consume
 rs’ tastes across varieties. By allowing each firm-product to enter consum
 er preferences in a non-symmetric way\, we show how taste heterogeneity in
 teracts with quality and cost heterogeneity to shape the market outcome. E
 mbedding market-variety specific tastes\, in a model with firm-product cos
 t and quality differences\, generates a new set of predictions that appear
  much more in line with recent micro-data evidence in the literature. Inde
 ed\, using a unique micro-level dataset on Belgian exporters with product 
 and destination market information\, is a first confirmation that in addit
 ion to cost and quality\, "accounting for taste" in trade matters. Hylke V
 andenbussche is Professor International Economics (Chaire Jacquemin) at IR
 ES-CORE at the Université Catholique de Louvain in Belgium. Her research i
 nterests lie at the intersection of international trade and industrial org
 anization.
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DTSTAMP:20260510T083650Z
DTSTART:20110926T200000Z
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SUMMARY:Trade Development and Political Economy Presents: Hylke Vandenbussc
 he
UID:RFCALITEM639139846103168052
X-ALT-DESC;FMTTYPE=text/html:Trade Development and Political Economy Presen
 ts: Hylke Vandenbussche Verti-zontal Differentiation in Monopolistic Compe
 tition Modern Existing trade models that guide empirical research do not s
 eem to perform well in explaining firm-product level prices and sales. In 
 response to this growing evidence\, this paper aims to generalize a model 
 of quadratic preferences in a way not done previously. Starting from a mod
 el with cost and quality differences\, we argue that an important source o
 f heterogeneity\, overlooked in the existing trade models\, is the heterog
 eneity of consumers’ tastes across varieties. By allowing each firm-produc
 t to enter consumer preferences in a non-symmetric way\, we show how taste
  heterogeneity interacts with quality and cost heterogeneity to shape the 
 market outcome. Embedding market-variety specific tastes\, in a model with
  firm-product cost and quality differences\, generates a new set of predic
 tions that appear much more in line with recent micro-data evidence in the
  literature. Indeed\, using a unique micro-level dataset on Belgian export
 ers with product and destination market information\, is a first confirmat
 ion that in addition to cost and quality\, "accounting for taste" in trade
  matters. Hylke Vandenbussche is Professor International Economics (Chaire
  Jacquemin) at IRES-CORE at the Université Catholique de Louvain in Belgiu
 m. Her research interests lie at the intersection of international trade a
 nd industrial organization.
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