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TASTE FOR VARIETY AND OPTIMUM PRODUCT DIVERSITY IN AN OPEN ECONOMY |
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| Authors: | Javier Coto-Martínez María D C García-Alonso† Paul Levine‡ |
| Institution: | Department of Economics, City University, London, UK;, Department of Economics, University of Kent, Canterbury, UK;, and Department of Economics, University of Surrey, Guildford, Surrey, UK |
| Abstract: | We extend the Benassy 'taste for variety' model to an open economy setting. With the Benassy effect, the market equilibrium is inefficient, openness reduces the varieties provided in the unconstrained optimum and there are potential gains from international coordination. |
| Keywords: | Benassy effect monopolistic competition open economy taste for variety |