IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/3815.html
   My bibliography  Save this paper

Compatibility Standards and Strategic Trade Policy

Author

Listed:
  • Walz, Uwe
  • Woeckener, Bernd

Abstract

We analyse the compatibility decisions of two national firms producing horizontally differentiated variants of a good that exhibits network effects for the world market. One of the firms is able to endogenously establish an installed base in its domestic market. The firm's effort in that respect is reinforced by a production subsidy that covers the firm's domestic market. With the help of a three-country model we ask under which circumstances this local subsidy may be and actually is used as a strategic trade-policy device. We show that the installed-base effect plays a role only when the firms opt for incompatibility. In addition, we obtain the result that only for intermediate values of the network-effect parameter incompatibility is chosen. In all other cases, compatibility emerges and so the local subsidy can be shown to increase world welfare.

Suggested Citation

  • Walz, Uwe & Woeckener, Bernd, 2003. "Compatibility Standards and Strategic Trade Policy," CEPR Discussion Papers 3815, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3815
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP3815
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Compatibility decisions; Strategic trade policy; Standards;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3815. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.