Network Externalities, Strategic Delegation and Optimal Trade Policy

Anomita Ghosh and Rupayan Pal
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Anomita Ghosh: National Council of Applied Economic Research
Rupayan Pal: Indira Gandhi Institute of Development Research (IGIDR)

No 152, NCAER Working Papers from National Council of Applied Economic Research

Abstract: This paper examines strategic trade policy for differentiated network-goods oligopolies under alternative scenarios when there is export-rivalry between two countries. We demonstrate that, in the absence of managerial delegation, the optimal trade policy entails an export tax (subsidy) if network externalities are weak (strong). However, when price competition is combined with managerial delegation, the opposite is true. Subsidizing exports, on the other hand, is always optimal under quantity competition. We also show that the welfare consequences of strategic trade policy depend not only on the mode of product market competition, but also on firms’ internal organizations and the strength of network externalities.

Keywords: Strategic trade policy; network goods; relative-performance based managerial delegation; price competition; quantity competition. (search for similar items in EconPapers)
JEL-codes: D21 F12 F13 L13 L22 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2024-01-01
New Economics Papers: this item is included in nep-com, nep-gth, nep-int and nep-inv
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Persistent link: https://EconPapers.repec.org/RePEc:nca:ncaerw:152

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