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Policies and international trade agreements on technical compatibility for industries with network externalities

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  • Klimenko, Mikhail M.

Abstract

The paper considers a country (home) in which consumers have heterogeneous preferences over ex ante incompatible domestic and imported products and benefit from a network externality. We analyze the cases with trade under perfect competition and the international duopoly, in which both governments strategically use policies toward compatibility but cannot use conventional trade policies. In both cases, the equilibrium outcome of the non-cooperative game depends upon the strength of the network externality effect and involves either an excessively high equilibrium level of compatibility (in combination with either too much or too little trade) or very low equilibrium levels of both compatibility and trade. The paper concludes with the analysis of the international agreements on policies toward compatibility and evaluates the existing provisions in the WTO legal system aimed at minimizing the trade-inhibiting impact of standards and regulations in the area of technical compatibility.

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  • Klimenko, Mikhail M., 2009. "Policies and international trade agreements on technical compatibility for industries with network externalities," Journal of International Economics, Elsevier, vol. 77(2), pages 151-166, April.
    • Handle: RePEc:eee:inecon:v:77:y:2009:i:2:p:151-166
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    3. Gene M. Grossman & Phillip McCalman & Robert W. Staiger, 2021. "The “New” Economics of Trade Agreements: From Trade Liberalization to Regulatory Convergence?," Econometrica, Econometric Society, vol. 89(1), pages 215-249, January.
    4. Kenji Fujiwara, 2011. "Network externalities, transport costs, and tariffs," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(6), pages 729-739, October.
    5. Cordoba, Juan Carlos & He, Sicheng, 2021. "Growing like Google: Endogenous Growth with Global Network Externalities," ISU General Staff Papers 202107160700001130, Iowa State University, Department of Economics.
    6. Toulemonde, Eric, 2013. "A welfare analysis of the principle of mutual recognition," European Economic Review, Elsevier, vol. 60(C), pages 1-16.
    7. Ederington,Josh & Ruta,Michele, 2016. "Non-tariff measures and the world trading system," Policy Research Working Paper Series 7661, The World Bank.

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