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>Knowledge growth II◮ Knowledge is growing proportional to the achieved knowledge;◮ There are no diminishing returns;◮ By choosing the units <strong>for</strong> K such as the proportionality factoris 1, we have:K(t) ˙ = ∑ L ni K(t)/a Lni . (20)isince knowledge is not country-specific.◮ The acquisition <strong>of</strong> knowledge is costless <strong>and</strong> free;◮ Hence the costs <strong>of</strong> product development are:c ni = w i a Lni /n. (21)