Network externalities, strategic delegation and optimal trade policy

Anomita Ghosh, Rupayan Pal and Ruichao Song

International Review of Economics & Finance, 2024, vol. 96, issue PB

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: Network goods; Strategic trade policy; Managerial firms; Export rivalry; Competition (search for similar items in EconPapers)
JEL-codes: D21 F12 F13 H25 L13 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pb:s1059056024006476

DOI: 10.1016/j.iref.2024.103655

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