This paper starts by showing that in the European car industry, there exist cross-country taste differences along the product attribute dimension that significantly drive net trade patterns and reduce the volume of trade. Further it is shown that, after the creation of the European common...

This paper analyses firm's pricing-to-market decisions in vertically differentiated industries. We first present a model featuring firms that sell goods of heterogeneous quality levels to consumers who are heterogeneous in their income and thus their marginal willingness to pay for quality...

We develop a model of vertical innovation in which firms incur a market entry cost and position themselves in the quality space. Once established, firms compete monopolistically in the quality space, selling to consumers with heterogeneous tastes for quality. Exogenously growing productivities...