Trade Negotiations in the Presence of Network Externalities
Network externalities exist when the benefit a consumer derives from a good or service depends on the number of other consumers using the same good, or service (as happens, for example, with telecommunications, television broadcasting standards, an...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/04/437743/trade-negotiations-presence-network-externalities http://hdl.handle.net/10986/18835 |
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okr-10986-18835 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
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English en_US |
| topic |
NETWORK ANALYSIS NETWORKS TRADE NEGOTIATIONS CONSUMER BEHAVIOR GOODS SERVICES TELECOMMUNICATIONS TECHNOLOGY TELEVISION BROADCASTING TECHNOLOGY DIFFUSION MONOPOLISTIC COMPETITION REGULATORY FRAMEWORK STATE-OWNED ENTERPRISES DEREGULATION COMPETITIVENESS TRADING ARRANGEMENTS TRANSMISSIONS POLICY FRAMEWORK INTERNATIONAL TRADE GLOBALIZATION FREE TRADE AREAS TRADE LIBERALIZATION REGIONAL INTEGRATION TRADE BLOCKS TRANSFER PAYMENTS MULTILATERAL AGREEMENTS BENCHMARK BENEFICIAL TRADE CARTEL COLLUSION CONSUMER PURCHASING CONSUMER SURPLUS CONSUMERS CONVERGENCE DEREGULATION DEVELOPMENT DOMESTIC MARKET DUOPOLY ECONOMICS LITERATURE ECONOMIES OF SCALE ELECTRONICS PRODUCERS EQUILIBRIUM EXPECTED UTILITY FIXED COSTS FOREIGN COMPETITION FOREIGN FIRM FOREIGN TECHNOLOGIES FREE TRADE GLOBAL FREE TRADE GLOBAL WELFARE GOVERNMENT REGULATIONS IMPORT TARIFFS INEFFICIENCY INELASTIC DEMAND INTERNATIONAL TRADE MARGINAL BENEFIT MARGINAL COST MARGINAL COSTS MARKET POWER MEMBER COUNTRIES MEMBER STATES MONOPOLIES MULTILATERAL AGREEMENTS MULTILATERAL TRADE MULTILATERAL TRADE AGREEMENTS MULTILATERAL TRADE ARRANGEMENTS NETWORK EXTERNALITIES OPTIMIZATION POLITICAL ECONOMY PRODUCERS PRODUCT STANDARDS PRODUCTION COSTS PROFIT MARGIN QUANTITATIVE RESTRICTIONS REGIONAL BLOC REGIONAL BLOCS REGIONALISM TELECOMMUNICATIONS TRADE TRADE AGREEMENTS TRADE ARRANGEMENTS TRADE LIBERALIZATION TRADE MORE TRADE NEGOTIATIONS TRADE POLICY TRADE REGIME TRADE REGIMES TRADING ARRANGEMENT TRADING ARRANGEMENTS TRADING PARTNER TRADING PARTNERS TRANSFER PAYMENTS UNEMPLOYMENT WELFARE LOSS WTO ZERO PROFITS MULTILATERAL AGREEMENTS BENCHMARK |
| spellingShingle |
NETWORK ANALYSIS NETWORKS TRADE NEGOTIATIONS CONSUMER BEHAVIOR GOODS SERVICES TELECOMMUNICATIONS TECHNOLOGY TELEVISION BROADCASTING TECHNOLOGY DIFFUSION MONOPOLISTIC COMPETITION REGULATORY FRAMEWORK STATE-OWNED ENTERPRISES DEREGULATION COMPETITIVENESS TRADING ARRANGEMENTS TRANSMISSIONS POLICY FRAMEWORK INTERNATIONAL TRADE GLOBALIZATION FREE TRADE AREAS TRADE LIBERALIZATION REGIONAL INTEGRATION TRADE BLOCKS TRANSFER PAYMENTS MULTILATERAL AGREEMENTS BENCHMARK BENEFICIAL TRADE CARTEL COLLUSION CONSUMER PURCHASING CONSUMER SURPLUS CONSUMERS CONVERGENCE DEREGULATION DEVELOPMENT DOMESTIC MARKET DUOPOLY ECONOMICS LITERATURE ECONOMIES OF SCALE ELECTRONICS PRODUCERS EQUILIBRIUM EXPECTED UTILITY FIXED COSTS FOREIGN COMPETITION FOREIGN FIRM FOREIGN TECHNOLOGIES FREE TRADE GLOBAL FREE TRADE GLOBAL WELFARE GOVERNMENT REGULATIONS IMPORT TARIFFS INEFFICIENCY INELASTIC DEMAND INTERNATIONAL TRADE MARGINAL BENEFIT MARGINAL COST MARGINAL COSTS MARKET POWER MEMBER COUNTRIES MEMBER STATES MONOPOLIES MULTILATERAL AGREEMENTS MULTILATERAL TRADE MULTILATERAL TRADE AGREEMENTS MULTILATERAL TRADE ARRANGEMENTS NETWORK EXTERNALITIES OPTIMIZATION POLITICAL ECONOMY PRODUCERS PRODUCT STANDARDS PRODUCTION COSTS PROFIT MARGIN QUANTITATIVE RESTRICTIONS REGIONAL BLOC REGIONAL BLOCS REGIONALISM TELECOMMUNICATIONS TRADE TRADE AGREEMENTS TRADE ARRANGEMENTS TRADE LIBERALIZATION TRADE MORE TRADE NEGOTIATIONS TRADE POLICY TRADE REGIME TRADE REGIMES TRADING ARRANGEMENT TRADING ARRANGEMENTS TRADING PARTNER TRADING PARTNERS TRANSFER PAYMENTS UNEMPLOYMENT WELFARE LOSS WTO ZERO PROFITS MULTILATERAL AGREEMENTS BENCHMARK Kubota, Keiko Trade Negotiations in the Presence of Network Externalities |
| relation |
Policy Research Working Paper;No. 2317 |
| description |
Network externalities exist when the
benefit a consumer derives from a good or service depends on
the number of other consumers using the same good, or
service (as happens, for example, with telecommunications,
television broadcasting standards, and many other
technology-related goods and services). National monopolies,
regulated and endorsed by sovereign governments, tended to
produce network externalities in the past: most countries
had telephone monopolies, often state-owned, before
deregulation. Whether to allow foreign competition in such
industries becomes a pressing issue when national boundaries
begin to blur as technology advances, and as previously
untraded goods and services become tradable. Despite obvious
gains from trade in such newly tradable sectors, governments
often keep trade-prohibiting measures. With analog high
definition television (HDTV) transmission standards, for
example, regulations and politics kept Europe, and Japan
from cooperating, so each invested heavily to develop its
system in an attempt to have its own standard adopted by the
rest of the world. The author analyzes how the presence of
network externalities affects a country's willingness
to trade. In her model, governments decide whether or not to
allow international trade. When trading is permitted, the
superior standard drives out all other in the trading area.
She shows that even when there are efficiency gains from
worldwide standardization, global free trade may not
prevail. The technology leader is generally eager to trade,
but countries with less advanced technology often choose to
form inefficient regional blocks, or not to trade at all.
Once such regional networks are established, global
efficiency-enhancing free trade becomes even harder to
achieve than it would have been in their absence. Transfer
payments between countries reduce or eliminate such
inefficiency, and facilitate the achievement of efficient
trade in products. To achieve mutually beneficial
arrangements, it is important to arrive at multilateral
agreements before regional blocks form. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Kubota, Keiko |
| author_facet |
Kubota, Keiko |
| author_sort |
Kubota, Keiko |
| title |
Trade Negotiations in the Presence of Network Externalities |
| title_short |
Trade Negotiations in the Presence of Network Externalities |
| title_full |
Trade Negotiations in the Presence of Network Externalities |
| title_fullStr |
Trade Negotiations in the Presence of Network Externalities |
| title_full_unstemmed |
Trade Negotiations in the Presence of Network Externalities |
| title_sort |
trade negotiations in the presence of network externalities |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2000/04/437743/trade-negotiations-presence-network-externalities http://hdl.handle.net/10986/18835 |
| _version_ |
1764441580728483840 |
| spelling |
okr-10986-188352021-04-23T14:03:46Z Trade Negotiations in the Presence of Network Externalities Kubota, Keiko NETWORK ANALYSIS NETWORKS TRADE NEGOTIATIONS CONSUMER BEHAVIOR GOODS SERVICES TELECOMMUNICATIONS TECHNOLOGY TELEVISION BROADCASTING TECHNOLOGY DIFFUSION MONOPOLISTIC COMPETITION REGULATORY FRAMEWORK STATE-OWNED ENTERPRISES DEREGULATION COMPETITIVENESS TRADING ARRANGEMENTS TRANSMISSIONS POLICY FRAMEWORK INTERNATIONAL TRADE GLOBALIZATION FREE TRADE AREAS TRADE LIBERALIZATION REGIONAL INTEGRATION TRADE BLOCKS TRANSFER PAYMENTS MULTILATERAL AGREEMENTS BENCHMARK BENEFICIAL TRADE CARTEL COLLUSION CONSUMER PURCHASING CONSUMER SURPLUS CONSUMERS CONVERGENCE DEREGULATION DEVELOPMENT DOMESTIC MARKET DUOPOLY ECONOMICS LITERATURE ECONOMIES OF SCALE ELECTRONICS PRODUCERS EQUILIBRIUM EXPECTED UTILITY FIXED COSTS FOREIGN COMPETITION FOREIGN FIRM FOREIGN TECHNOLOGIES FREE TRADE GLOBAL FREE TRADE GLOBAL WELFARE GOVERNMENT REGULATIONS IMPORT TARIFFS INEFFICIENCY INELASTIC DEMAND INTERNATIONAL TRADE MARGINAL BENEFIT MARGINAL COST MARGINAL COSTS MARKET POWER MEMBER COUNTRIES MEMBER STATES MONOPOLIES MULTILATERAL AGREEMENTS MULTILATERAL TRADE MULTILATERAL TRADE AGREEMENTS MULTILATERAL TRADE ARRANGEMENTS NETWORK EXTERNALITIES OPTIMIZATION POLITICAL ECONOMY PRODUCERS PRODUCT STANDARDS PRODUCTION COSTS PROFIT MARGIN QUANTITATIVE RESTRICTIONS REGIONAL BLOC REGIONAL BLOCS REGIONALISM TELECOMMUNICATIONS TRADE TRADE AGREEMENTS TRADE ARRANGEMENTS TRADE LIBERALIZATION TRADE MORE TRADE NEGOTIATIONS TRADE POLICY TRADE REGIME TRADE REGIMES TRADING ARRANGEMENT TRADING ARRANGEMENTS TRADING PARTNER TRADING PARTNERS TRANSFER PAYMENTS UNEMPLOYMENT WELFARE LOSS WTO ZERO PROFITS MULTILATERAL AGREEMENTS BENCHMARK Network externalities exist when the benefit a consumer derives from a good or service depends on the number of other consumers using the same good, or service (as happens, for example, with telecommunications, television broadcasting standards, and many other technology-related goods and services). National monopolies, regulated and endorsed by sovereign governments, tended to produce network externalities in the past: most countries had telephone monopolies, often state-owned, before deregulation. Whether to allow foreign competition in such industries becomes a pressing issue when national boundaries begin to blur as technology advances, and as previously untraded goods and services become tradable. Despite obvious gains from trade in such newly tradable sectors, governments often keep trade-prohibiting measures. With analog high definition television (HDTV) transmission standards, for example, regulations and politics kept Europe, and Japan from cooperating, so each invested heavily to develop its system in an attempt to have its own standard adopted by the rest of the world. The author analyzes how the presence of network externalities affects a country's willingness to trade. In her model, governments decide whether or not to allow international trade. When trading is permitted, the superior standard drives out all other in the trading area. She shows that even when there are efficiency gains from worldwide standardization, global free trade may not prevail. The technology leader is generally eager to trade, but countries with less advanced technology often choose to form inefficient regional blocks, or not to trade at all. Once such regional networks are established, global efficiency-enhancing free trade becomes even harder to achieve than it would have been in their absence. Transfer payments between countries reduce or eliminate such inefficiency, and facilitate the achievement of efficient trade in products. To achieve mutually beneficial arrangements, it is important to arrive at multilateral agreements before regional blocks form. 2014-06-30T18:17:54Z 2014-06-30T18:17:54Z 2000-04 http://documents.worldbank.org/curated/en/2000/04/437743/trade-negotiations-presence-network-externalities http://hdl.handle.net/10986/18835 English en_US Policy Research Working Paper;No. 2317 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |