Mrazova, Monika; Vines, David; Zissimos, Benjamin - 2008
, driving CU-expansion all the way to free trade.
There are two reasons for this. First, free trade is preferred by consumers … all varieties of goods in the model are consumed by consumers in
all countries, more varieties are subject to a tari … terms of the numeraire good.
Consumers have quasilinear-quadratic preferences of the form
u(qi;Mi) = v(qi) +Mi = aQi 2Q2i …