| 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 consumersf 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. |