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Network externalities and tariff structure

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  • Wei Yu
  • Leonard F. S. Wang

Abstract

In this paper, we show that with cost asymmetry, stronger network externalities and less differentiated goods, the uniform tariff rate set by the government of the importing country increases and the optimal discriminatory-tariff gap widens. In addition, under network externalities and good differentiation, we demonstrate that: (a) the optimal tariff policy is superior to free trade in maximizing the domestic social welfare; (b) the maximum-revenue tariff rate is always higher than the optimal tariff rate; (c) the consumer surplus and social welfare are always higher under the optimal tariff policy than under the maximum-revenue tariff policy.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:raaexx:v:24:y:2017:i:3-4:p:485-496
    DOI: 10.1080/16081625.2016.1210014
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    References listed on IDEAS

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    3. Pei-Cheng Liao & Kar-yiu Wong, 2006. "Uniform versus Discriminatory Tariffs: When Will Export Taxes Be Used?," Southern Economic Journal, John Wiley & Sons, vol. 72(4), pages 915-925, April.
    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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    7. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
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    Cited by:

    1. 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.
    2. Lee, Chien-Hui & Lee, Jen-Yao & Wang, Leonard F.S., 2021. "Foreign Ownership and Optimal Discriminatory Tariffs under Oligopolistic Competition," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(1), pages 97-114.

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