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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent.

Product Differentiation and Domestic Prices: tively. This paper has benefited greatly from and draws upon A Partial Equilibrium Analysis collaborative work undertaken with Kemal Dervis. We also wish to thank two anonymous referees for helpful comments. When domestically produced goods and for-The views expressed in this paper are those of the authors and not necessarily those of the institutions with which they eign produced goods are perfect substtutes i are associated. use and when the country is small, an increase in I See, for instance, the single country models of Dixon, the import price results in the same increase in Parmenter, Ryland and Sutton (1977), Dervis, de Melo and the domestic price Thus with the exception of Robinson (1981), and the multi-country models of Deardorifftedmsi

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