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High Tech Trade Policy

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  • Kala Krishna

Abstract

This 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 Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2182.

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Date of creation: Mar 1987
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Publication status: published as Krishna, Kala. "High Tech Trade Policy," Issues in US - EC Trade Relations,ed. by R. Baldwin, C. Hamilton and A. Sapir. Chicago: UCP, 1988.
Handle: RePEc:nbr:nberwo:2182

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Cited by:
  1. Kubota, Keiko, 2000. "Trade negotiations in the presence of network externalities," Policy Research Working Paper Series 2317, The World Bank.
  2. Vőneki, Éva, 2004. "Zur Bewertung des ungarischen SAPARD-Programms unter besonderer Berücksichtigung der Investitionen im Milchsektor," IAMO Discussion Papers 59, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
  3. Klodt, Henning, 1992. "Theorie der strategischen Handelspolitik und neue Wachstumstheorie als Grundlage für eine Industrie- und Technologiepolitik?," Kiel Working Papers 533, Kiel Institute for the World Economy.
  4. Gröhn, Andreas, 1997. "Netzwerkeffekte: eine neue Begründung für die strategische Handelspolitik?," Kiel Working Papers 826, Kiel Institute for the World Economy.
  5. Jensen, Richard & Thursby, Marie, 1996. "Patent Races, Product Standards, and International Competition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 21-49, February.
  6. Bletschacher, Georg, 1991. "Ansätze strategischer Handels- und Industriepolitik: Ein Überblick," Kiel Working Papers 487, Kiel Institute for the World Economy.
  7. Jeanneret, Marie-Helene & Verdier, Thierry, 1996. "Standardization and protection in a vertical differentiation model," European Journal of Political Economy, Elsevier, vol. 12(2), pages 253-271, September.

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