Indirect network effects and the impact of trade liberalization: A note

Kazumichi Iwasa and Toru Kikuchi

The Journal of International Trade & Economic Development, 2009, vol. 18, issue 4, 541-552

Abstract: In this note, we examine how trade liberalization affects production structure in the presence of indirect network effects (hardware/software systems). For these purposes we construct a simple two-country model of trade with two incompatible hardware technologies. It is shown that, given that both types of hardware exist before trade liberalization, liberalization and increased intra-industry trade in software products may reduce the variety of hardware technology via intensified network effects. It is also shown that, contrary to the findings of previous studies on intra-industry trade, some consumers may become worse off as the result of trade.

Keywords: indirect network effects; hardware/software systems; trade liberalization; intra-industry trade (search for similar items in EconPapers)
Date: 2009
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Working Paper: Indirect Network Effects and the Impact of Trade Liberalization: A Note (2008)
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DOI: 10.1080/09638190802464966

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