Melitz, Marc J.; Ottaviano, Gianmarco I. P. - In: Review of Economic Studies 75 (2008) 1, pp. 295-316
We develop a monopolistically competitive model of trade with firm heterogeneity—in terms of productivity differences—and endogenous differences in the "toughness" of competition across markets—in terms of the number and average productivity of competing firms. We analyse how these...