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Indirect Network Effects and Trade Patterns

Author

Listed:
  • Toru Kikuchi

    (Kobe University)

  • Kazumichi Iwasa

    (Kobe University)

Abstract

Indirect network effects exist when the utility of consumers is increasing in the variety of complementary products available for use with an electronic hardware device. In this note, we examine how indirect network effects work as a determinant of trade patterns. For these purposes we construct a simple two-country model of trade with incompatible country-specific hardware technologies. We show that trade patterns are determined by the interaction between hardware differentiation and indirect network effects due to software availability.

Suggested Citation

  • Toru Kikuchi & Kazumichi Iwasa, 2007. "Indirect Network Effects and Trade Patterns," Economics Bulletin, AccessEcon, vol. 6(24), pages 1-9.
    • Handle: RePEc:ebl:ecbull:eb-07f10012
    as

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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume6/EB-07F10012A.pdf
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    References listed on IDEAS

    as
    1. Gandal, Neil & Shy, Oz, 2001. "Standardization policy and international trade," Journal of International Economics, Elsevier, vol. 53(2), pages 363-383, April.
    2. Neil Gandal, 2002. "Compatibility, Standardization, and Network Effects: Some Policy Implications," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 18(1), pages 80-91, Spring.
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    Cited by:

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    3. Vincent Vannetelbosch & Cecilia Vergari & Ana Mauleon, 2008. "Market integration in network industries," Economics Bulletin, AccessEcon, vol. 12(25), pages 1-7.

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    JEL classification:

    • F1 - International Economics - - Trade

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