High Tech Trade Policy
AbstractThis paper analyzes the role of network externalities and expectations about them in the formulation of trade policy. Their effects are studied in duopoly situations when products are compatible and when they are incompatible and when multimarket effects are possible. Network externalities and expectations regarding the size of the network affect optimal trade policy in three ways. First, the presence of expectations effects creates a role for 'policy if. there are differences between the way the externalities operate and expectations about how they operate. Second, when goods are compatible, the existence of network externalities can cake goods complementary which reverses the direction of optimal policy. .Third, since multimarket effects occur naturally with network externalities and compatible products, purely domestic policies, which are legal under GATT, can have international profit shifting effects which may be in the national 'interest.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2182.
Date of creation: Feb 1989
Date of revision:
Publication status: published as Kala Krishna. "High-Tech Trade Policy," in Robert E. Baldwin, Carl B. Hamilton and Andre Sapir, editors, "Issues in US-EC Trade Relations" University of Chicago Press (1988)
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