nep-net New Economics Papers
on Network Economics
Issue of 2005‒07‒03
ten papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Two-Sided Network Effects, Bank Interchange Fees, and the Allocation of Fixed Costs By Bergman, Mats A.
  2. Coalition Formation with Local Public Goods and Network Effect By Fan-chin Kung
  3. Non Cooperatives Stackelberg Networks: Get Informed Earlier Pays Off By Juan M.C. Larrosa
  4. Social capital as social networks. A new framework for measurement By Fabio Sabatini
  5. Social Capital, Public Spending and the Quality of Economic Development By Fabio Sabatini
  6. Managing drivers of innovation in construction networks By Bossink, Bart A.G.
  7. A study of inter-firm market orientation dimensions in Swedish, British and Italian supplier-retailer relationships By Elg, Ulf
  8. Empirical evidence for a theory of international new ventures By Reinhard Meckl; Robert Schramm
  9. The Location Decisions of Foreign Logistics Firms in China: Does Transport Network Capacity Matter? By Anthony Chin; Hong Junjie
  10. Education, Employment and Earnings of Secondary School-Leavers in Tanzania: Evidence from a Tracer Study By Samer Al-Samarrai; Barry Reilly

  1. By: Bergman, Mats A. (Department of Economics, Södertörn University College)
    Abstract: Two-sided network effects in card payment systems are analysed under different market structures, e.g., competition, one-sided monopoly, bilateral monopoly and duopoly; with and without an interchange fee; for the so-called Baxter’s case of non-strategic merchants. A partial ranking of market structures according to their welfare effects is provided. Fixed central (card) system costs are introduced and analysed under free entry and duopoly. It is shown that under free entry, a per-transaction distribution of fixed costs is preferrable to dividing the fixed costs in equal proportions between the participants. Under duopoly, (and no entry) a fixed division of central costs will yield lower prices.
    Keywords: Two-sided markets; card payments; payment systems; acquiring; issuing; market structure
    JEL: G21 L11 L44
    Date: 2005–06–01
  2. By: Fan-chin Kung (City University of Hong Kong & Academia Sinica)
    Abstract: Many local public goods are provided by coalitions and some of them have network effects. Namely, people prefer to consume a public good in a coalition with more members. This paper adopts the Drèze and Greenberg (1980) type utility function where players have preferences over goods as well as coalition members. In a game with anonymous and separable network effect, the core is nonempty when coalition feasible sets are monotonic and players' preferences over public goods have connected support. All core allocations consist of connected coalitions and they are Tiebout equilibria as well. We also examine the no-exodus equilibrium for games whose feasible sets are not monotonic.
    Keywords: Coalition formation, core, network effect, local public goods
    JEL: C71 D71 H41
    Date: 2005–06–28
  3. By: Juan M.C. Larrosa (CONICET-Universidad Nacional del Sur)
    Abstract: Non cooperative network-formation games in oligopolies analyze the optimal connection structure that emerges when linking represent the appropriation of cost-reducing one-way externalities. These models reflect situations where one firm access to another firm’s (public or private) information and this last cannot refuse it. What would happen if one firm can move first? A classical model of exogenous Stackelberg leader is developed and first-mover advantages are observed.
    Keywords: Keywords: non cooperative games, network formation strategies, Stackelberg equilibrium.
    JEL: C70 D43 L13
    Date: 2005–06–29
  4. By: Fabio Sabatini (University of Rome La Sapienza)
    Abstract: The contribution of this paper to the social capital literature is twofold. Drawing on the Italian data, it firstly provides a new framework for measurement, allowing to build indicators for five different components of the multidimensional concept of social capital. Secondly, it provides a single, synthetic, measure capturing that particular configuration of social capital which the literature generally associates with positive economic outcomes. This measure is here referred to as “developmental social capital”.
    Keywords: Social capital, Social networks, Economic development, Principal component analysis, Multiple factor analysis
    JEL: A12 O10 O18 R11
    Date: 2005–06–29
  5. By: Fabio Sabatini (University of Rome La Sapienza)
    Abstract: This paper carries out an empirical assessment of the relationship between social capital and the quality of economic development in Italy. The analysis draws on a dataset collected by the author including about two hundred variables representing different aspects of economic development and four “structural” dimensions of social capital. The quality of development is measured through human development and indicators of the state of health of urban ecosystems, public services, gender equality, and labour markets, while social capital is measured through synthetic indicators representing strong family ties, weak informal ties, voluntary organizations, and political participation. The quality of development exhibits a strong positive correlation with bridging weak ties and a negative correlation with strong family ties. Particularly, the analysis shows a strong correlation between informal ties and an indicator of “social well-being” (synthetizing gender equality, public services and labour markets) and between voluntary organizations and the state of health of urban ecosystems. Active political participation proves to be irrelevant in terms of development and well-being. Finally, the role of public spending for education, health care, welfare work, and the environment protection is analysed, revealing a scarce correlation both with social capital and development indicators.
    Keywords: Social capital, Social networks, Public spending, Economic development, Principal component analysis
    JEL: O15 O18 R11
    Date: 2005–06–29
  6. By: Bossink, Bart A.G. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)
    Abstract: Various drivers of construction innovation are distinguished and classified in four distinctive categories: environmental pressure, technological capability, knowledge exchange, and boundary spanning. Innovation drivers in these categories are active at the transfirm, intrafirm, and interfirm level in the network of organizations in the construction industry. Empirical research in the Dutch construction industry illustrates that the innovation drivers are used by managers of the authorities, clients, architects, consultants, and contractors to stimulate and facilitate innovation processes. It also exemplifies that driving innovation on the transfirm, intrafirm, and interfirm level in the network of organizations is an opportunity for managers of both public and private organizations to develop, improve, and renew: their organizations' positions in the market, the quality of their organizations' projects, and the cooperative structure of the industry as a whole.
    Keywords: Construction industry; Netherlands; Innovation
    Date: 2004
  7. By: Elg, Ulf (Department of Business Administration, School of Economics and Management, Lund University)
    Abstract: Previous research demonstrates that a firm’s market orientation is influ-enced by network factors, but few regard market orientation as an inter-firm phe-nomenon, i.e. as a part of cooperative inter-firm activities and relationships. The paper suggests inter-firm market orientation as an approach for studying this. It is based on Kohli and Jaworski’s three original components, but their meaning within an interorganizational relationship is modified and dimensions that enable us to systematically analyse inter-firm market orientation are identified empiri-cally. The results are based on a qualitative study on supplier-retailer relationships in Sweden, Italy and the UK. Four dimensions are found to be especially relevant and propositions are presented concerning how they influence the overall degree of inter-firm MO.
    Keywords: Market orientation; inter-firm relationships; cooperation; ydistribu-tion channels; food sector
    Date: 2005–05–16
  8. By: Reinhard Meckl (Faculty of Economics, University Bayreuth, Germany); Robert Schramm (University of Jena, Faculty of Economics)
    Abstract: This paper analyzes twenty empirical studies relating to international new ventures (INVs). Based on this analysis it is shown that traditional internationalization theories do not explain INVs sufficiently. Therefore a model integrating static and process elements from the empirical evidence as well as parts of the traditional internationalization theories is developed. Obtained was an eclectic theory describing and explaining the rise of new firms already venturing abroad briefly after the time of their formation. Key results A 4-pillar-model for explaining the internationalization of INVs is developed. The model relies on basic assumptions from the network-, the stages-, the internalization- and the monopolistic advantage theory.
    Keywords: Born global, international new ventures, internationalization theory
    Date: 2005–06–20
  9. By: Anthony Chin (Department of Economics, National University of Singapore); Hong Junjie (School of International Trade and Economics, University of International Business and Economics, Beijng, China)
    Abstract: In recent years the logistic needs have created tremendous pressure on the ‘hard’ transport infrastructure. Logistics and the harness of information technology are the key facilitators of mobility. The Chinese logistics market is still in its infancy and creates tremendous opportunities for investors. It recognized as one of important driving forces both for national economy and business. Beijing, Tianjin, Shanghai, Shenzhen and Guanzhou aspire to be regional or international logistics hubs and have adopted preferential policies in attracting FDIs in logistics. From 1996 to 2001, foreign capital invested in transportation, storage, post and telecommunications increased from USD6.96 billion to USD15.16 billion. This study looks at the location decisions of foreign logistics firms and identifies with the aid of a multinomial logit model factors that are crucial in attracting them to China. This is important as they have an important role to play in filling in the gap left by traditional Chinese firms, which largely concentrate, on warehousing and distribution. The results suggest that location of logistics firms depends on transport infrastructure, market size, labor quality and cost, agglomeration economies, communication cost, economic privatization degree, as well as government incentives. The importance of the above factors varies by source of region. European and North American firms favor higher population densities, lower labor cost, convenient airway transport and large cities while logistics firms from Hong Kong, Macao and Taiwan put more emphasis on communication infrastructure.
  10. By: Samer Al-Samarrai (Institute of Development Studies, University of Sussex); Barry Reilly (Poverty Research Unit at Sussex, Department of Economics, University of Sussex)
    Abstract: The extent of information on labour market outcomes and the earnings of educated groups in Tanzania, and Sub-Saharan Africa more generally, are limited. This is particularly so for individuals who fail to gain access to wage employment and are required to rely on exploiting self-employment opportunities. The current paper, using a recently completed tracer survey of secondary school completers, analyses the impact of education and training on individual welfare through the estimation of earnings equations. Our empirical evidence suggests that the rates of return to educational qualifications are not negligible and, at the margin, provide an investment incentive. However, we find little evidence of human capital effects in the earnings determination process in the self-employment sector. Information contained in the tracer survey allowed the introduction of controls for father’s educational background and a set of school fixed effects designed to proxy for school quality and potential labour market network effects. The analysis shows that the inclusion of these controls tends to reduce the estimated rates of return to educational qualifications. This emphasizes the potential confounding role of school quality/network effects and parental background for rate of return analysis. We would argue that a failure to control for such background variables potentially leads to an over-statement in the estimated returns to education. A comparison of our results with evidence from other countries in the region shows that despite an extremely small secondary and university education system the private rates of return to education in the Tanzanian wage employment sector are relatively low.
    Date: 2005–06

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