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TARIFFS AND TRADE LIBERALISATION WITH NETWORK EXTERNALITIES *
Author(s) -
FUJIWARA KENJI
Publication year - 2011
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2011.00413.x
Subject(s) - tariff , network effect , externality , economics , liberalization , welfare , microeconomics , nash equilibrium , international economics , free trade , market economy
This paper constructs a reciprocal market model of intra‐industry trade in network goods to consider the implications of network externalities for an optimal tariff policy and the welfare effects of bilateral tariff reductions. We show that the degree of network externalities nontrivially affects the sign of the Nash equilibrium tariff. Then, we prove that network externalities amplify the gains from tariff reductions. These results help better understand the implications of trade‐related issues in network industries.