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Network externalities, transport costs, and tariffs

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  • Kenji Fujiwara

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.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:jitecd:v:20:y:2011:i:6:p:729-739
    DOI: 10.1080/09638190903452647
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    7. Makoto Yano & Fumio Dei, 2006. "Network externalities, discrete demand shifts, and submarginal-cost pricing," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 455-476, May.
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    Cited by:

    1. Wei Yu & Leonard F. S. Wang, 2017. "Network externalities and tariff structure," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 24(3-4), pages 485-496, October.
    2. Tsaur-Chin Wu & Chih-Ta Yen & Hsiu-Wei Chang, 2023. "Network externalities, trade costs, and the choice of commodity taxation principle," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(5), pages 1203-1224, October.
    3. Anomita Ghosh & Rupayan Pal, 2017. "Welfare Ranking of Alternative Export Taxes Revisited," Economics Bulletin, AccessEcon, vol. 37(2), pages 1033-1044.
    4. Anomita Ghosh & Rupayan Pal, 2014. "Strategic trade policy for network goods oligopolies," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-039, Indira Gandhi Institute of Development Research, Mumbai, India.

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