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Congestible communications networks and international trade

Toru Kikuchi and Tetsuro Ichikawa

Canadian Journal of Economics/Revue canadienne d'économique, 2002, vol. 35, issue 2, 331-340

Abstract: We build a two‐country model of monopolistic competition with communications networks. A communications network is characterized by (1) the existence of large fixed costs of network provision, and (2) the presence of congestion. It is demonstrated that both the size of a country and the relative magnitude of the congestion effect determine its comparative advantage: if the congestion effect (resp., the cost‐sharing effect) prevails universally, a comparative advantage in the goods that require communications is held by the smaller (resp., larger) of the two countries. JEL Classification: D43, F12 Réseaux de communication, congestion et commerce international. Ce mémoire présente un modèle de concurrence monopolistique à deux pays avec des réseaux de communication. Un réseau de communication est caractérisé par (1) l’existence de coûts fixes importants pour la mise en place du réseau et (2) la présence de congestion. On montre que la taille du pays et la magnitude relative de la congestion déterminent l’avantage comparatif : si l’effet de congestion (ou respectivement l’effet de partage des coûts) prévaut, un avantage comparatif dans les biens qui demandent plus de communication est détenu par le plus grand (respectivement le plus petit) des deux pays.

Date: 2002
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https://doi.org/10.1111/1540-5982.00133

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