nep-net New Economics Papers
on Network Economics
Issue of 2005‒04‒03
three papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Competition and Efficiency in Congested Markets By Daron Acemoglu; Asuman Ozdaglar
  2. Pricing Capital Under Mandatory Unbundling and Facilities Sharing By Robert S. Pindyck
  3. Friendship Relations in the School Class and Adult Economic Attainment By Andrea Galeotti; Gerrit Müller

  1. By: Daron Acemoglu; Asuman Ozdaglar
    Abstract: We study the efficiency of oligopoly equilibria in congested markets. The motivating examples are the allocation of network flows in a communication network or of traffic in a transportation network. We show that increasing competition among oligopolists can reduce efficiency, measured as the difference between users' willingness to pay and delay costs. We characterize a tight bound of 5/6 on efficiency in pure strategy equilibria. This bound is tight even when the number of routes and oligopolists is arbitrarily large. We also study the efficiency properties of mixed strategy equilibria.
    JEL: D43 C62
    Date: 2005–03
  2. By: Robert S. Pindyck
    Abstract: The regulation of telecommunications, railroads, and other network industries has been based on mandatory unbundling and facilities sharing - entrants have the option to lease part or all of incumbents' facilities if and when they desire, at rates determined by regulators. This flexibility is of great value to entrants, but because investments are largely irreversible, it is costly to supply by incumbents. However, pricing formulas used by regulators to set lease rates for capital do not compensate incumbents for this flexibility, so that incumbents are effectively forced to subsidized entrants, discouraging further investments. This paper shows how pricing formulas used to set lease rates can be adjusted to account for the transfer of option value from incumbents to entrants, and estimates the average size of the adjustment for land-based local voice telecommunications in the U.S.
    JEL: L51
    Date: 2005–03
  3. By: Andrea Galeotti (University of Essex, UK); Gerrit Müller (Erasmus Universiteit Rotterdam)
    Abstract: We analyze the impact of adolescents' friendship relations in their final-year class of high school on subsequent labor market success. Based on a typology of network positions we locate each student within the social system of the school class as either: an <I>isolate</I>, a <I>sycophant</I>, a <I>broker</I> or a <I>receiver</I>. These positions identify individuals' social standing within the group of classmates and proxy for their interpersonal behavior and social competencies. We offer empirical evidence that differential social standing in adolescence predicts large and persistent earnings disparities over the entire life course. The estimated wage premia and penalties do not appear to be substantially confounded by measures of family and school resources, and materialize largely independent of differences in cognitive abilities, grade rank in class or friends' characteristics. A moderate share of the earnings inequalities is mediated by differential post-secondary human and social capital investment. From a conceptual point of view, we contribute an application of egocentered network methods within conventional labor economic survey research.
    Keywords: friendship ties; social capital; earnings
    JEL: A14 I21 J31
    Date: 2005–03–23

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