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Chapter 3: Antecedents and Affinities: Heterogeneous Demand and Differential Advantage
This chapter continues the process of reviewing the theories, research programs, and traditions that resource-advantage theory either draws on or shares affinities with. In particular, this chapter discusses heterogeneous demand theory and differential advantage theory. Again, I review only those portions of each theory relevant to R-A theory and point readers toward more comprehensive reviews.
The neoclassical tradition assumes both homogeneous, intra-industry demand and homogeneous, intra-industry supply. That is, neoclassical theory focuses on, strictly speaking, the demand for and production of commodities. As Stigler (1957) puts it: “The formal condition [in perfect competition] that there be many producers of a commodity assumes homogeneity of this commodity” (p. 13; italics ...