Taste for variety: Model of Grossman and Helpman.
Taste for variety: Model of Grossman and Helpman.
Taste for variety: Model of Grossman and Helpman.
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Variety expansionThe <strong>Model</strong>Middle products producers◮ Middle products producers engage in oligopolistic competitionin every country;◮ Every producer sets the price <strong>of</strong> his/her product as tomaximize pr<strong>of</strong>its:π i (ω) = (p X (ω) − w i a LXi ) ×p X (ω) −ɛβ ∑ n∫p X (ω) 1−ɛ dω i0p Yi Y i . (12)where a LXi is the unit labour requirement in country i <strong>for</strong>production <strong>of</strong> intermediaries.◮ The pr<strong>of</strong>it is per unit pr<strong>of</strong>it (in brackets) times the dem<strong>and</strong> <strong>for</strong>the middle product.
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