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This paper sets up a model of endogenous product differentiation to analyze the variety effects of international trade. In our model multi-product firms decide not only about the number of varieties they supply but also about the degree of horizontal differentiation between these varieties....
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The key result of the so-called "New Trade Theory" is that countries gain from falling trade costs by an increase in … this loss in the existence value outweighs the direct benefits from consumption. -- Trade theory ; Globalization ; Variety …
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