This paper discusses a model of vertical and horizontal product differentiation within the Dixit-Stiglitz framework of monopolistic competition. Firms compete not only in prices and horizontal attributes of their products, but also in the quality that can be controlled by R&D activities. Based...

Economic geography aims to explain agglomeration primarily through the channels of increasing returns, monopolistic competition and international factor mobility. By contrast, this paper constructs a theoretical model based on capital market frictions. Monopolistically competitive firms are run...