Monopolistic Competition Model for Multiproduct Firms Producing Goods of Different Quality

The majority of international trade includes big multiproduct companies which specialize in several types of products. As a rule, these companies choose some basic goods to produce which will be demanded among customers and bring the major part of revenue. Because of that a lot of economists focus on multiproduct firms' research. On of the most important criteria when analyzing multiproduct firms' effectiveness is quality differentiation. Choosing different level of product quality for their goods, firms vary quality of resources to use in production: expensive and high-quality goods are produced as a result of high investment and vice versa. In the current research we develop a model of monopolistic competition for multiproduct firms producing goods of different quality. The important aspect here is a special attitude to consumption side of a market. In particular, in real life consumers are heterogenous and have different income, education, customs, habits, attitude to quality etc. Correspondingly, each consumer tends to buy goods from definite range of price and quality. Thus, in current research a special attention is paid to heterogeniety of consumers and dividing them by groups when firms produce certain type of product for each group. As a result, firms will try to gain the market share by producing goods of different quality. In order to get some analytical results in the current research we develop the monopolistic competition model with "love for variety" and "love for quality" parameters. We aim to describe the process of finding the equilibrium for multiproduct firms producing goods of different quality for heterogenous consumers in short and long run.