Network externalities, transport costs, and tariffs

Kenji Fujiwara ()

The Journal of International Trade & Economic Development, 2011, vol. 20, issue 6, 729-739

Abstract: This article formulates a reciprocal market model of international duopoly with network externalities to reconsider welfare effects of reductions in transport costs and tariffs. Depending on the magnitude of network externalities, we show two possibilities. One of them, which emerges under strong network externalities, illustrates that freer trade unambiguously improves welfare for any initial level of trade barriers. This finding provides an affirmative evaluation of freer trade.

Date: 2011
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Working Paper: Network Externalities, Transport Costs and Tariffs (2010)
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DOI: 10.1080/09638190903452647

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