International Trade and Retailing,

Abstract The New Trade Theory predicts that international trade lowers prices for consumers and raises the choices available to them. This study shows that both predictions may no longer hold once adjustments in retailing are taken into account. We present a new model of retailing in general equilibrium and establish a trade-off between the number of products stocked and the number of retail outlets. The results demonstrate that international trade can lead to higher consumer prices if the retail market is relatively less competitive, and that retail assortments do not rise if consumers have a sufficiently low preference for diversity. Keywords: International Trade, Retailing, Diversity, Market Structure, Welfare, Monopolistic Competition. JEL Classification: F12, L11, L81 * I gratefully acknowledge research support from the German Science Foundation (DFG grant number EC 216/5-1). Thanks also to Jim Anderson, Beata Javorcik, James Markusen, J. Peter Neary, Volker Nocke, Michael Pflüger, Horst Raff, and Michael Rauscher for helpful comments and discussions. A previous version of this paper circulated with the subtitle "Diversity versus Accessibility and the Creation of 'Retail Deserts'" and was presented at various conferences and seminars