nep-net New Economics Papers
on Network Economics
Issue of 2005‒01‒16
two papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Environmental Innovation, War of Attrition and Investment Grants By Michele Moretto; Cesare Dosi
  2. From Simplistic to Complex Systems in Economics By Prof John Foster

  1. By: Michele Moretto (University of Brescia); Cesare Dosi (University of Padova)
    Abstract: The paper analyses the timing of spontaneous environmental innovation when second-mover advantages, arising from the expectation of declining investment costs, increase the option value of waiting created by investment irreversibility and uncertainty about private payoffs. We then focus on the design of public subsidies aimed at bridging the gap between the spontaneous time of technological change and the socially desirable one. Under network externalities and incomplete information about firms. switching costs, auctioning investment grants appears to be a cost-effective way of accelerating pollution abatement, in that it allows targeting grants instead of subsidizing the entire industry indiscriminately.
    Keywords: Environmental innovation, Investment irreversibility, Network externalities, Investment grants, Second-price auction
    JEL: Q28 O38
    Date: 2004–12
  2. By: Prof John Foster (School of Economics, The University of Queensland)
    Abstract: The applicability of complex systems theory in economics is evaluated and compared with standard approaches to economic theorizing based upon constrained optimization. A complex system is defined in the economic context and differentiated from complex systems in physio-chemical and biological settings. It is explained why it is necessary to approach economic analysis from a network, rather than a production and utility function perspective, when we are dealing with complex systems. It is argued that much of heterodox thought, particularly in neo-Schumpeterian and neo-Austrian evolutionary economics, can be placed within a complex systems perspective upon the economy. The challenge is to replace prevailing 'simplistic' theories, based in constrained optimization, with 'simple' theories, derived from network representations in which value is created through the establishment of new connections between elements.
    Date: 2004

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