Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This paper shows, however, that this added realism also implies that there may exist a positive...

This paper examines the relationship between market integration and product diversification in a Chamberlinian model of monopolistic competition. In the first version of the model, production of the firm is organised in activities producing either one or two horizontally differentiated...