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Congestible communications networks and international trade

Author

Listed:
  • Toru Kikuchi
  • Tetsuro Ichikawa

Abstract

We build a two‐country model of monopolistic competition with communications networks. A communications network is characterized by (1) the existence of large fixed costs of network provision, and (2) the presence of congestion. It is demonstrated that both the size of a country and the relative magnitude of the congestion effect determine its comparative advantage: if the congestion effect (resp., the cost‐sharing effect) prevails universally, a comparative advantage in the goods that require communications is held by the smaller (resp., larger) of the two countries. JEL Classification: D43, F12 Réseaux de communication, congestion et commerce international. Ce mémoire présente un modèle de concurrence monopolistique à deux pays avec des réseaux de communication. Un réseau de communication est caractérisé par (1) l’existence de coûts fixes importants pour la mise en place du réseau et (2) la présence de congestion. On montre que la taille du pays et la magnitude relative de la congestion déterminent l’avantage comparatif : si l’effet de congestion (ou respectivement l’effet de partage des coûts) prévaut, un avantage comparatif dans les biens qui demandent plus de communication est détenu par le plus grand (respectivement le plus petit) des deux pays.

Suggested Citation

  • Toru Kikuchi & Tetsuro Ichikawa, 2002. "Congestible communications networks and international trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(2), pages 331-340, May.
    • Handle: RePEc:wly:canjec:v:35:y:2002:i:2:p:331-340
    DOI: 10.1111/1540-5982.00133
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    Cited by:

    1. Ashok S. Guha & Brishti Guha, 2009. "Trade, Growth, and Increasing Returns to Infrastructure: The Role of the Sophisticated Monopolist," Review of International Economics, Wiley Blackwell, vol. 17(5), pages 1053-1065, November.
    2. Toru Kikuchi, 2003. "Interconnectivity of communications networks and international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 155-167, February.
    3. Nguyen HIEP & Hiroshi OHTA, 2005. "Heterogeneity, Networks and International Trade under Monopolistic Competition," GSICS Working Paper Series 1, Graduate School of International Cooperation Studies, Kobe University.
    4. Jeon, Bang Nam & Tang, Linghui, 2005. "Information Technology and Bilateral FDI: Theory and Evidence," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 613-630.
    5. repec:ebl:ecbull:v:15:y:2007:i:5:p:1-9 is not listed on IDEAS
    6. Nguyen Hiep & Hiroshi Ohta, 2007. "Efficiency in International Trade with Firm Heterogeneity and Networks," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 217-231, May.
    7. repec:ebl:ecbull:v:6:y:2005:i:3:p:1-9 is not listed on IDEAS
    8. 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.
    9. Colin Davis, 2007. "Communication costs, network externalities, and long-run growth," Economics Bulletin, AccessEcon, vol. 15(5), pages 1-9.
    10. Toru Kikuchi & Chiharu Kobayashi, 2003. "Communications networks and virtual economic integration: The case of three countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(1), pages 1-6, February.
    11. Colin Davis, 2005. "Capital-Intensive Country-Specific Network Costs and Intra-Industry Trade," Economics Bulletin, AccessEcon, vol. 6(3), pages 1-9.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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