This paper investigates the effect of endogenous horizontal product differentiation on trade patterns and the gains from trade under Bertrand and Cournot oligopoly. Firms differentiate their products to mitigate competition, but only if the investment required is not too high. Investment in...

This paper provides a new and simple model of endogenous horizontal product differentiation based on a standard demand structure derived from quadratic utility. One objective of the paper is to explain the "empirical Bertrand paradox" - the failure to observe homogeneous product Bertrand...

When research and development take place before the associated output is produced, imperfectly competitive firms may use R&D for strategic purposes rather than simply to minimize costs. Using a simple symmetric two-stage Nash duopoly model, we show that such strategic use of R&D will increase...