| This paper combines the Chamberlinian approach and the (nested and un-nested) multinomial logit model of discrete choice theory to the analysis of product differentiation and international trade. By taking a different approach and getting the same results as Krugman's paper, this paper supports Krugman's paper and Dixit and Stiglitz's approach against their criticisms.; By introducing the population heterogeneity (or love of variety) index {dollar}mu{dollar} into the single-product-firm economy, this paper shows that besides the exploitation of economies of scales and the extension of market, the love of variety is also a very strong incentive for international trade. |
