nep-net New Economics Papers
on Network Economics
Issue of 2005‒05‒07
nine papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Public Good Aspects of TARGET: Natural Monopoly, Scale Economies, and Cost Allocation By Wilko Bolt; David B. Humphrey
  2. Strategic Basins of Attraction, the Farsighted Core, and Network Formation Games By Frank H. Page, Jr.; Myrna H. Wooders
  3. Living life By Garrett, James
  4. The Tale of Two research Communities: The Diffusion of Research on Productive Efficiency By Finn R. Førsund; Nikias Sarafoglou
  6. The Dynamics of Innovation Networks By Lionel Nesta; Vincent Mangematin
  7. When Micro Shapes the Meso: Learning Networks in a Chilean Wine Cluster By Elisa Giuliani; Martin Bell
  8. Social Networks of Researchers in Business To Business Marketing: A Case Study of the IMP Group 1984-1999 By Piera Morlacchi; Ian F. Wilkinson; Louise Young
  9. Change, Coordination, and Capabilities By Andrea Prencipe

  1. By: Wilko Bolt; David B. Humphrey
    Abstract: This paper discusses various theoretic concepts which play a role in assessing the public benefits ofTarget, the large value RTGS payment network operated by the Eurosystem. These concepts touch upon natural monopoly, network externalities, competition and contestability, as well as economies of scale and scope. Based on empirical results for the Federal Reserve's payment system (Fedwire), it is argued that if Target decided to standardize its operating platforms and consolidate its processing sites into one or a few centers, it too could realize strong scale economy benefits and lower unit costs. The main thrust of the paper concerns natural monopoly and the possibility of lowering unit payment processing cost via economies of scale. The existence of a natural monopoly provides a rationale for a temporary partial or full subsidy in order for Target to achieve the `most efficient scale' or apply the most efficient technology to lower unit costs. Such a subsidy could be implemented through temporary 'penetration' pricing (i.e., pricing at less than full current cost). When the lower costs are realized, the subsidy would be removed and full cost pricing implemented. Once users face the full costs of their payment decisions, they are better able to match benefits with actual costs and implement a more efficient allocation of payment resources than occurs today on Target.
    Keywords: public good; natural monopoly; most efficient scale; partial subsidy
    JEL: G20 H41 L10
    Date: 2005–04
  2. By: Frank H. Page, Jr. (Department of Finance, University of Alabama); Myrna H. Wooders (Department of Economics, Vanderbilt University)
    Abstract: We make four main contributions to the theory of network formation. (1) The problem of network formation with farsighted agents can be formulated as an abstract network formation game. (2) In any farsighted network formation game the feasible set of networks contains a unique, finite, disjoint collection of nonempty subsets having the property that each subset forms a strategic basin of attraction. These basins of attraction contain all the networks that are likely to emerge and persist if individuals behave farsightedly in playing the network formation game. (3) A von Neumann Morgenstern stable set of the farsighted network formation game is constructed by selecting one network >from each basin of attraction. We refer to any such von Neumann-Morgenstern stable set as a farsighted basis. (4) The core of the farsighted network formation game is constructed by selecting one network >from each basin of attraction containing a single network. We call this notion of the core, the farsighted core. We conclude that the farsighted core is nonempty if and only if there exists at least one farsighted basin of attraction containing a single network.          To relate our three equilibrium and stability notions (basins of attraction, farsighted basis, and farsighted core) to recent work by Jackson and Wolinsky (1996), we define a notion of pairwise stability similar to the Jackson-Wolinsky notion and we show that the farsighted core is contained in the set of pairwise stable networks. Finally, we introduce, via an example, competitive contracting networks and highlight how the analysis of these networks requires the new features of our network formation model.
    Date: 2005–04
  3. By: Garrett, James
    Abstract: "With urban dwellers purchasing 80 percent or more of their food, understanding urban employment is critical to designing policies and programs to address urban hunger and poverty. Reviewing the literature, but also using data from household surveys conducted by the International Food Policy Research Institute (IFPRI) and others in five countries of Latin America, Asia, and Africa, this paper profiles urban employment in developing-country cities. It highlights some often-overlooked aspects of urban conditions, most especially the importance of agriculture, the continuing importance of the formal sector, and seasonality of income, even among those not connected to agriculture. It also examines the connections between poverty and employment; looks at where people work and what they do; and highlights the importance of personal networks, the informal sector, and the concerns of women. Finally, it notes some dynamic forces shaping the future of urban employment and suggests some guidelines for policies and programs." Author's Abstract
    Keywords: Hunger ,
    Date: 2004
  4. By: Finn R. Førsund; Nikias Sarafoglou
    Abstract: The field of theoretical and applied efficiency analysis is pursued both by economists and people from operational research and management science. Each group tends to cite a different paper as the seminal one. Recent availability of extensive electronically accessible databases of journal articles makes studies of the diffusion of papers through citations possible. Research strands inspired by the seminal paper within economics are identified and followed by citation analysis during the 20 year period before the operations research paper was published. The first decade of the operations research paper is studied in a similar way and emerging differences in diffusion patterns are pointed out. Main factors influencing citations apart from the quality of the research contribution are reputation of journal, reputation of author, number of close followers; colleagues, “cadres of protégés”, Ph.D. students, and extent of network (“invisible college”). Such factors are revealed by the citing papers. In spite of increasing cross contacts between economics and operations research the last decades co-citation analysis reveals a relative constant tendency to stick to “own camp” references.
    Keywords: Farrell efficiency measures, data envelopment analysis, DEA, bibliometry
    JEL: B21 D24
    Date: 2005–02
  5. By: Stan J. Liebowitz (University of Texas at Dallas); Stephen E. Margolis (North Carolina State University)
    Abstract: In 2002, seventeen economists including five Nobel Laureates presented an amicus curiae brief discussing the economics of copyright extension in support of the petitioners in Eldred v. Ashcroft. The economists’ amicus brief was unusual in several respects, not least in that it brought together a group of economists almost as notable for its diversity of opinion (spanning the ideological spectrum from Kenneth Arrow to Milton Friedman) as for its academic distinction. When such a distinguished and broad panel of economists readers would have every reason to believe that the arguments set forth in this document are sound down to the smallest details. Yet this is not the case. Scholars in the fields of law and economics will continue to address the economics of copyright duration in the foreseeable future, so it is important that they understand the imperfections in the economists’ brief. This Article provides a counterweight to the amicus brief, identifying some points the economists ignored, clarifying some discussions they did not quite get right, and providing data that runs counter to some assumptions they made.
    Keywords: Eldred, coypright, sonny bono, lessig
    JEL: K
    Date: 2005–05–03
  6. By: Lionel Nesta (SPRU, University of Sussex); Vincent Mangematin (INRA, University Pierre Mendes-France)
    Abstract: We analyse the changing contribution of networks to the innovative performance of 30 pharmaceutical companies from 1989 to 1997. Count data models show that collaborations with universities and biotechnology companies are important determinants of the firms' innovative performance, but their respective contributions diverge when industry matures. Larger firms enjoy a significant size advantage and in-house research activities are highly significant. Returns to scale in research are decreasing over time while the size advantage is increasing. The changing contribution of networks to knowledge production suggests that these are phase-specific, which has substantial managerial and policy implications.
    Keywords: pharmaceutical industry, biotechnology, innovative processes, networks
    JEL: O31 D85
    Date: 2005–04–26
  7. By: Elisa Giuliani (SPRU, University of Sussex); Martin Bell (SPRU, University of Sussex)
    Abstract: Most analyses of the relationship between spatial clustering and the technological learning of firms have emphasised the influence of the former on the latter, and have focused on intra-cluster learning as the driver of innovative performance. This paper reverses those perspectives. It examines the influence of individual firms' absorptive capacities on both the functioning of the intra-cluster knowledge system and its interconnection with extra-cluster knowledge. It applies social network analysis to identify different cognitive roles played by cluster firms and the overall structure of the knowledge system of a wine cluster in Chile. The results show that knowledge is not diffused evenly 'in the air', but flows within a core group of firms characterised by advanced absorptive capacities. Firms' different cognitive roles include some - as in the case of technological gatekeepers - that contribute actively to the acquisition, creation and diffusion of knowledge. Others remain cognitively isolated from the cluster, though in some cases strongly linked to extra-cluster knowledge. Possible implications for policy are noted.
    Keywords: clusters, absorptive capacity, knowledge communities, technological gatekeepers
    JEL: O33
    Date: 2005–04–26
  8. By: Piera Morlacchi (SPRU, University of Sussex); Ian F. Wilkinson (University of New South Wales); Louise Young (University of Technology, Sydney)
    Abstract: Science is a social process that functions through social networks of researchers that form invisible colleges. Analysis of these social networks provides a means for examining the structure of relations among researchers. The Industrial Marketing and Purchasing (IMP) group, "an informal international group of scholars concerned with developing concepts and knowledge in the field of business-to-business marketing and purchasing," is used as a case study of a network of researchers because it has been responsible for considerable research over the last decades in the area of business-to-business marketing, yet its structure remains hidden because of its informal network characteristics. The results of a social network analysis of the IMP group is described based on the pattern of co-authorship at annual IMP conferences. The results reveal a power law distribution of paper co-authorship and a small world network that conforms to the results of studies of other types of social networks. A core network of 57 researchers is identified and its network properties are described, including how it has evolved over time. The study provides the basis for further studies of the social networks of marketing and business researchers.
    Keywords: informal networks, business-to-business marketing
    JEL: D85
    Date: 2005–04–26
  9. By: Andrea Prencipe (Università G. D’Annunzio di Pescara, and SPRU, University of Sussex)
    Abstract: Empirical studies on coordination of economic activities focused on the two polar cases of governance mode, namely vertical integration and market exchanges. Whether firms should be vertically integrated or lever market exchanges in the face of change is, however, debated. Two positions have emerged. Some scholars argue that the vertically integrated firm is the appropriate mode of coordination when change occurs, while market exchanges are more appropriate for dealing with stable contexts (Teece, 1996). On the other hand, Harrigan (1984, 1985) contends that firms should rely on market exchanges when technological change renders upstream capabilities obsolete. Based on two case studies of the aircraft engine industry, this paper introduces the concept of systems integration as the primary coordination mechanism in-between markets and hierarchies that firms employ to cope with change. The focus is on multitechnology settings. Multitechnology, multicomponent products intensify the coordination efforts for firms developing them and therefore provide a vantage point to study coordination modes in the face of technological change. The paper argues that systems integration, as a coordination mechanism, comprises a set of different technological and organizational skills, ranging from component assembly through the understanding and integration of the technological disciplines underlying a product, to project management. It shows that from a competitive point of view, systems integration is most appropriately understood as knowledge integration. Systems integrating firms are understood as those organizations that set up the network of actors involved in the industry and lead it from an organizational and technological viewpoint.
    Keywords: technological change, systems integration, knowledge integration, vertical integration, market exchanges
    JEL: O33 L22
    Date: 2005–04–26

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