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Competing Industrial Standards and the Impact of Trade Liberalization:Revised and Enlarged

Author

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  • Toru Kikuchi

    () (Graduate School of Economics, Kobe University)

  • Kazumichi Iwasa

    (Kyoto Institute of Economic Research, Kyoto University)

Abstract

The main purpose of this study is to illustrate, with simple trade theory, the relationship between competing industrial standards and trade liberalization. We assume that there are two competing industrial standards in an international context, each of which applies to a group of differentiated products. A product can be used only in combination with other products based on the same industrial standard.We examine the impact of trade liberalization (i.e., a decline in trade costs) on consumers f choice of a standard. It will be shown that the degree of indirect network effects, captured with substitution between differentiated products, plays an important role as a determinant of the impact of trade liberalization.

Suggested Citation

  • Toru Kikuchi & Kazumichi Iwasa, 2009. "Competing Industrial Standards and the Impact of Trade Liberalization:Revised and Enlarged," Discussion Papers 0913, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:0913
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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2009/0913.pdf
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    References listed on IDEAS

    as
    1. Chou, Chien-fu & Shy, Oz, 1990. "Network effects without network externalities," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 259-270, June.
    2. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, pages 297-308.
    3. Toru Kikuchi, 2007. "Network Externalities And Comparative Advantage," Bulletin of Economic Research, Wiley Blackwell, vol. 59(4), pages 327-337, October.
    4. Lembke, Johan, 2002. "Global Competition and Strategies in the Information and Communications Technology Industry: A Liberal-Strategic Approach," Business and Politics, Cambridge University Press, vol. 4(01), pages 41-69, April.
    5. Kazumichi Iwasa & Toru Kikuchi, 2011. "Software Provision and the Impact of Market Integration," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 685-696, September.
    6. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
    7. Murray C. Kemp & Koji Shimomura, 2001. "Gains From Trade in a Cournot-Nash General Equilibrium," The Japanese Economic Review, Japanese Economic Association, vol. 52(3), pages 284-302.
    8. Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 85-103, March.
    9. Chou, Chien-fu & Shy, Oz, 1996. "Do consumers gain or lose when more people buy the same brand," European Journal of Political Economy, Elsevier, vol. 12(2), pages 309-330, September.
    10. Neil Gandal, 2002. "Compatibility, Standardization, and Network Effects: Some Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 18(1), pages 80-91, Spring.
    11. repec:hoo:wpaper:e-92-18 is not listed on IDEAS
    12. Iwasa, Kazumichi & Kikuchi, Toru, 2008. "Software Provision and the Impact of Market Integration: A Note," MPRA Paper 9315, University Library of Munich, Germany.
    13. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, pages 297-308.
    14. Kenji Fujiwara, 2005. "Unilateral and Multilateral Gains from Trade in International Oligopoly," The Economic Record, The Economic Society of Australia, vol. 81(255), pages 404-413, December.
    15. Lembke Johan, 2002. "Global Competition and Strategies in the Information and Communications Technology Industry: A Liberal-Strategic Approach," Business and Politics, De Gruyter, vol. 4(1), pages 1-30, April.
    16. Toru Kikuchi, 2005. "Interconnected communications networks and home market effects," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 870-882, August.
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