Essays on product differentiation and trade

Product differentiation is a key feature of modern economies. Although its relevance had already been recognized in the XIX century, it is only in the last forty years that a formal treatment has been developed. The 'address approach' distinguishes between horizontal and vertical product differentiation; in the former, consumers do not agree on the quality ranking of commodities, while in the second they do. The first three chapters of this thesis deal with vertical product differentiation in an imperfectly competitive framework. In particular, the first two essays take into account the empirical evidence concerning labor requirements in the production of vertically differentiated goods in order to model labor and product markets in an upstream-downstream relation to each other. The main assumption is that higher variants of vertically differentiated commodities require highly-skilled labor. This allows to study the links between labor markets and vertically differentiated products markets, their equilibrium implications and issues of trade liberalization. The third chapter explores another side of vertical product differentiation, namely the time-to-market of vertically differentiated goods. This interval, which corresponds to the lapse of time for a product to reach the market, is studied under the assumption that firms can make it shorter through costly investments. The analysis compares firms' choices as a function of the parameters characterizing products and technologies and of market structure. The last chapter develops a general equilibrium model with imperfect competition. The concept of monopoly equilibrium is applied to a Ricardian economy in order to study the emergence of trade in that framework.