| Abstract: | Product differentiation trade models have been developed in order to account for some contemporary patterns of international trade that are inexplicable under the theory of comparative advantage. This paper presents the case for the geographical differentiation of products. A generalized geographical product differentiation model of trade competition in industrial third markets is outlined within a discrete choice framework. The model treats product price and quality, as determined by country of origin, as distinct variables in export competition. An indirect empirical test of the model's validity, using the cases of export competition between the United States and the Federal Republic of Germany and the United States and Japan, indicates that the generalized model is worthwhile in its ability to account for successful trade competition. |
