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Toru Kikuchi and Kazumichi Iwasa
''Indirect Network Effects and Trade Patterns''
( 2007, Vol. 6 No.24 )
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.
JEL: F1 - Trade: General
Manuscript Received : Jul 12 2007 Manuscript Accepted : Jul 23 2007

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