Deviations from long-run price stability are optimal in the presence of endogenous entry and product variety in a sticky-price model in which price stability would be optimal otherwise Long-run inflation (deflation) is optimal when the benefit of variety to consumers falls short of (exceeds) the...

Most-favored-customer (MFC) clauses are usually seen as anticompetitive co-ordination devices that firms adopt for the purpose of higher prices. Here, I examine the welfare impact of MFC clauses under endogenous product variety. Product variety is relevant because prospective higher prices from...

The effects of entry on consumer and total welfare are studied in a model of consumer search. Potential entrants differ in quality, with high-quality sellers being more likely to meet consumer needs. Contrary to the standard view in economics that more entry benefits consumers, we find that...

The variety and quality of products has a great importance in the analysis of international trade flows. Several theoretical models show that larger and richer economies produce and export goods characterized by higher variety and quality. Accordingly, empirical studies have tried to quantify...

We calculate welfare gains of trade liberalization in the Central and East European transition economies, following the approach of Romer (1994), who emphasized that proper modeling of the impact of trade restrictions on the number of available product varieties is crucial to quantifying the...

This paper addresses two puzzles in international trade, namely why traditional estimates of income elasticities of exports are implausibly high and why the export growth varies much more markedly across countries than can be explained by price competitiveness and variations in income in export...

Utilising panel data for 14 East European transition economies, we find support for the hypothesis that a greater degree of export variety relative to the U.S. helps to explain relative per capita GDP levels. The empirical work relies upon some direct measures of product variety calculated from...

Outsourcing of non-core activities by firms is nowadays a common business strategy. This paper provides a theoretical framework for analyzing a firms’ incentive to follow such a strategy and its consequences for macroeconomic variables like growth and product variety. We divide production...

This paper explores different fiscal stimuli within a business cycle model with an endogenous number of firms. We demonstrate that a changing number of firms is a crucial dimension for evaluating fiscal policy since it accelerates the impacts of fiscal policy. In the presence of demand stimuli...

Utilising panel data for 14 East European transition economies we find support for the hypothesis that a greater degree of export variety relative to the U.S. helps to explain relative per capita GDP levels.The empirical work relies upon some direct measures of product variety calculated from...