nep-ict New Economics Papers
on Information and Communication Technologies
Issue of 2007‒12‒01
six papers chosen by
Walter Frisch
University Vienna

  1. Net Neutrality on the Internet: A Two-sided Market Analysis By Nicholas Economides; Joacim Tåg
  2. Has the ICT Revolution Run its Course? By Kenneth I. Carlaw; Richard G. Lipsey; Ryan Webb
  3. Securing Their Future? Entry And Survival In The Information Security Industry By Ashish Arora; Anand Nandkumar
  4. Public Policies and Changing Boundaries of Firms in a "History Friendly" Model of the Co-evolution of the Computer and Semiconductor Industries. By Franco Malerba; Richard Nelson; Luigi Orsenigo; Sidney Winter
  5. International Differences in the Adoption and Impact of New Information Technologies and New HR Practices: The Valve-Making Industry in the U.S. and U.K. By Ann Bartel; Casey Ichniowski; Kathryn Shaw; Ricardo Correa
  6. Behavioral Foundations for Conditional Markov Models of Aggregate Data By Douglas Miller

  1. By: Nicholas Economides (Stern School of Business, New York University); Joacim Tåg (Swedish School of Economics and Business Administration, FDPE, and HECER)
    Abstract: We discuss the benefits of net neutrality regulation in the context of a two-sided market model in which platforms sell Internet access services to consumers and may set fees to content and applications providers “on the other side” of the Internet. When access is monopolized, we find that generally net neutrality regulation (that imposes zero fees “on the other side” of the market) increases total industry surplus compared to the fully private optimum at which the monopoly platform imposes positive fees on content and applications providers. Similarly, we find that imposing net neutrality in duopoly increases total surplus compared to duopoly competition between platforms that charge positive fees on content providers. We also discuss the incentives of duopolists to collude in setting the fees “on the other side” of the Internet while competing for Internet access customers. Additionally, we discuss how price and non-price discrimination strategies may be used once net neutrality is abolished. Finally, we discuss how the results generalize to other two-sided markets.
    Keywords: net neutrality, two-sided markets, Internet, monopoly, duopoly, regulation, discrimination
    JEL: L1 D4 L12 L13 C63 D42 D43
    Date: 2007–09
  2. By: Kenneth I. Carlaw (University of British Columbia - Okanagan); Richard G. Lipsey (Simon Fraser University); Ryan Webb (Queen's University)
    Abstract: We assess the contention that the force of the ICT revolution was spent when the dotcom bubble burst. We identify the fundamental principle of flexible machine logic, the use of which distinguishes the group of modern ICTs - the electronic computer, the Internet and some related technologies - that make up the GPT of programmable computing networks (PCNs) and that have driven the ICT revolution. We seek to place PCN on two logistic trajectories that describe its evolving efficiency and applications. To gain some perspective, we then compare the evolution of PCN with that of electricity. We argue that PCN still has significant scope for increasing its efficiency and that it is still creating an undiminished flow of new applications, concluding that the force of the ICT revolution will continue for some decades.
    Keywords: ICT revolution, diffusion, electronic computers, internet, general purpose technologies.
    JEL: O33
    Date: 2007–09
  3. By: Ashish Arora; Anand Nandkumar
    Abstract: In this paper we study how the existence of a functioning market for technology differentially conditions the entry strategy and survival of different types of entrants, and the role of scale, marketing ability and technical assets. Markets for technology facilitate entry of firms that lack proprietary technology and increase vertical specialization. However, they also increase the relative advantage of downstream capabilities, which is reflected in the relatively improved performance of incumbent Information and Communication Technologies (ICT) firms compared to startups. We find that diversifying entrants perform better relative to startups. Contrary to earlier studies, we find that spin-offs do not perform any better than other startups. Moreover, firms founded by serious hobbyists and tinkerers, whom we call hackers, perform markedly better than other startups. These findings reflect the non-manufacturing setting of this study, as well as the distinctive nature of software technology.
    JEL: L24 L25 L26
    Date: 2007–11
  4. By: Franco Malerba (Cespri - Bocconi University, Milano, Italy.); Richard Nelson (Columbia University, New York, USA.); Luigi Orsenigo (University of Brescia, Brescia and CESPRI - Bocconi University, Milan, Italy.); Sidney Winter (The Wharton School, University of Pennsylvania, Philadelphia, USA.)
    Abstract: In this paper, we explore the effects of alternative policies, ranging from antitrust to public procurement, open standards, information diffusion and basic research support on the dynamics of two vertically related industries in changing and uncertain technological and market environments. The two industries are a system industry and a component industry, and the evolution of these industries is characterized by periods of technological revolutions punctuating periods of relative technological stability and smooth technical progress. We have been inspired by the co-evolution of the computer and component industries from their inceptions to the 1980s. On the basis of that evolution, we have developed a history friendly-model this co-evolution. In sum, this paper has stressed that various types of policies may sometimes have contrasting effects on the industry, mainly on concentration and technical change and innovation. It has also shown that the consequences of policies may spillover from one industry to another, and from one type of firms to another. Policies that aim at a specific industry may provoke major changes in a related industry through the product market, the changing boundaries of firms or knowledge and technological interdependencies. The policy maker has to be aware of that. Finally, a major point of the paper regards the unintended consequences of policies.
    Keywords: Industrial dynamics, Public Policy, Technology, Innovation.
    JEL: O30 L10 L60
    Date: 2007–06
  5. By: Ann Bartel; Casey Ichniowski; Kathryn Shaw; Ricardo Correa
    Abstract: This paper compares the impact of new IT-enhanced technology on the efficiency of production in the U.S. and the U.K. for one manufacturing industry, valve manufacturing. There is a long-standing question of whether technological change and organizational changes have the same rates of adoption and impact internationally. We have assembled a unique dataset on plants in one narrowly defined industry -- valve manufacturing -- in both the U.S. and U.K to consider whether plants outside of the U.S. gain as much from IT as U.S. plants. We find that, despite differences in the current and historical patterns of institutions in the U.S. and U.K., both countries exhibit comparable patterns of gains to IT at the plant level. The impact of new IT-enhanced technology on the efficiency of production is virtually identical in the two countries. In addition, as a result of the adoption of the new technology, plants in both countries have shifted production to customized products. Finally, we find that, in both countries, the adoption of the new IT-enhanced technology coincides with increases in the skill requirements of machine operators, notably technical and problem-solving skills, and with the adoption of new human resource practices to support these skills.
    JEL: E23 J23 J24 L1
    Date: 2007–11
  6. By: Douglas Miller (Department of Economics, University of Missouri-Columbia)
    Abstract: Conditional Markov chain models of observed aggregate sharetype data have been used by economic researchers for several years, but the classes of models commonly used in practice are often criticized as being purely ad hoc because they are not derived from microbehavioral foundations. The primary purpose of this paper is to show that the estimating equations commonly used to estimate these conditional Markov chain models may be derived from the assumed statistical properties of an agentspecific discrete decision process. Thus, any conditional Markov chain model estimated from these estimating equations may be compatible with some underlying agentspecific decision process. The secondary purpose of this paper is to use an information theoretic approach to derive a new class of conditional Markov chain models from this set of estimating equations. The proposed modeling framework is based on the behavioral foundations but does not require specific assumptions about the utility function or other components of the agentspecific discrete decision process. The asymptotic properties of the proposed estimators are developed to facilitate model selection procedures and classical tests of behavioral hypotheses.
    Keywords: controlled stochastic process, Frechet derivative, firstorder Markov chain, CressieRead power divergence criterion
    JEL: C40 C51
    Date: 2007–09–01

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