nep-ict New Economics Papers
on Information and Communication Technologies
Issue of 2014‒02‒21
five papers chosen by
Walter Frisch
University Vienna

  1. Net Neutrality with Competing Internet Platforms By Marc Bourreau; Frago Kourandi; Tommaso Valletti
  2. Matching Markets with N-Dimensional Preferences By Flanders, Sam
  3. Expectation Formation and Social Influence. By Andreas Karpf
  4. Imitation and Efficient Contagion By Tristan Boyer; Nicolas Jonard
  5. Ladislaus von Bortkiewicz - statistician, economist, and a European intellectual By Wolfgang Karl Härdle; Annette B. Vogt; ;

  1. By: Marc Bourreau (Telecom ParisTech and CREST-LEI); Frago Kourandi (Athens University of Economics and Business); Tommaso Valletti (University of Rome Tor Vergata and Imperial College London)
    Abstract: We propose a two-sided model with two competing Internet platforms, and a continuum of Content Providers (CPs). We study the effect of a net neutrality regulation on capacity investments in the market for Internet access, and on innovation in the market for content. Under the alternative discriminatory regime, platforms charge a priority fee to those CPs which are willing to deliver their content on a fast lane. We find that under discrimination investments in broadband capacity and content innovation are both higher than under net neutrality. Total welfare increases, though the discriminatory regime is not always beneficial to the platforms as it can intensify competition for subscribers. As platforms have a unilateral incentive to switch to the discriminatory regime, a prisoner's dilemma can arise. We also consider the possibility of sabotage, and show that it can only emerge, with adverse welfare effects, under discrimination.
    Keywords: Net neutrality; Two-sided markets; Platform competition; Investment; Innovation.
    JEL: L13 L51 L52 L96
    Date: 2014–02–14
  2. By: Flanders, Sam
    Abstract: Abstract. This paper analyzes matching markets where agent types are n-vectors of characteristics--i.e. points in R^n --and agents prefer matches that are closer to them according to a distance metric on this set (horizontal preferences). First, given a few assumptions, I show that in the Gale-Shapley stable matching in this environment, agents match to a linear function of their own type. I show that restrictions on preferences are not as onerous as they may seem, as a rich variety of preference structures can be mapped into the horizontal framework. With these results in hand, I develop a highly stylized model of an online dating platform that helps consumers find and contact potential matches, where consumers have preferences over many characteristics (e.g. height, income, age, etc.) and have the option to pay to join the platform or look for a match off the platform. I characterize the firm's optimal pricing strategy and the concomitant market outcomes for consumers. Finally, I address an unanswered question in the matching literature--can multidimensional preferences be aggregated (e.g. into a univariate measure of quality) without changing the salient features of the model? I find that, in the dating platform model I introduced, consumer preferences can be aggregated without any change to firm strategy or market outcomes, providing some justification for the univariate-type matching models prevalent in the theoretical matching literature.
    Keywords: Matching, Online Dating, Marriage, Family Economics, Mathematical Economics
    JEL: C78 D01 D10 L86
    Date: 2014–02
  3. By: Andreas Karpf (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: This article investigate the role of social influence for the expectation formation of economic agents. Using self-organizing Kohonen maps the repeated cross-section data set of the University of Michigan consumer survey is transformed into a pseudo panel allowing to monitor the expectation formation of cohorts with regard to business confidence over the whole available time span (January 1978 - June 2013). Subsequently the information theoretic concept of transfer entropy is used to reveal the role of social influence on the expectation formation as well as the underlying network structure. It is shown that social influence strongly depends on socio-demographic characteristics and also coincides with a high degree of connectivity. The social network estimated in this way follows a power-law and thus exhibits similar structure as networks observed in other contexts.
    Keywords: Social networks, expectations, household survey.
    JEL: D12 D83 D84 D85
    Date: 2014–02
  4. By: Tristan Boyer; Nicolas Jonard
    Abstract: This paper is about the diffusion of cooperation in an infinite population of networked individuals repeatedly playing a Prisoner’s Dilemma. We formulate conditions on payoffs and network structure such that, starting from an initial seed group, imitative learning results in the overall adoption of cooperation — efficient contagion. Key to this result is the pattern of interaction among players who are at the same distance from the initial seed group. We find that the more these agents interact among themselves rather than with players who are closer to or further away from the initial seed group, the easier it is for efficient contagion to take place. We highlight the importance of cycles for efficient contagion, and show that the presence of critical edges prevents it. We also find that networks organized as dense clusters sparsely connected to one another tend to resist efficient contagion. Finally, we find that the likelihood of efficient contagion in a network increases when information neighborhoods extend beyond interaction neighborhoods.
    Keywords: networks, imitation, contagion
    JEL: C7 D8
    Date: 2014–01–06
  5. By: Wolfgang Karl Härdle; Annette B. Vogt; ;
    Abstract: Ladislaus von Bortkiewicz (1868 - 1931) was a European statistician. His scientific work covered theoretical economics, stochastics, mathematical statistics and radiology, today we would call him a cross disciplinary scientist. With his clear views on mathematical principles with their applications in these fields he stood in conflict with the mainstream economic schools in Germany at the dawn of the 20th century. He had many prominent students (Gumbel, Leontief, Freudenberg among them) and he carved out the path of modern statistical thinking. He was a true European intellectual with a career path from St. Petersburg via Gottingen to Straßburg and finally the Berliner Universität, now Humboldt-Universität zu Berlin. He is known for the precise calibration of insurance claims applying the - at that time hardly known - Poisson distribution to Prussian horse kick and child suicide data. He proposed a simple solution to the Marxian transformation problem and wrote numerous articles and books on the mathematical treatment of statistical (including radiological physical) data. In this article we sketch his life and work and point out the prominent role that he has in today's statistical thinking.
    Keywords: History of science, Statistics, Horse kicks, Bortkiewicz
    JEL: N01 D02 B14 B16
    Date: 2014–02

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