nep-net New Economics Papers
on Network Economics
Issue of 2005‒09‒29
fifteen papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Risk-Sharing Networks By Yann Bramoullé; Rachel Kranon
  2. Peer Effects and Social Networks in Education and Crime By Calvó-Armengol, Antoni; Patacchini, Eleonora; Zenou, Yves
  3. In Search of Stars: Network Formation among Heterogeneous Agents By Goeree,Jacob K.; Riedl,Arno; Ule,Aljaz
  4. Innovators, Imitators, and the Evolving Architecture of Social Networks By Joseph E. Harrington, Jr
  5. Knowledge sharing in an Emerging Network of Practice: The Role of a Knowledge Portal By Baalen, P.J. van; Bloemhof-Ruwaard, J.M.; Heck, E. van
  6. The impact of network size on bank branch performance By Beverly Hirtle
  7. Equilibrium non-reciprocal Access Pricing in the Telecommunication Industry By Stefan Behringer
  8. A Simple Access Pricing Rule to Achieve the Ramsey Outcome in Two-Way Access By Doh-Shin Jeon
  9. Reciprocity of Knowledge Flows in Internal Network Forms of Organizing By Wijk, R.A.J.L. van; Bosch, F.A.J. van den; Volberda, H.W.; Heinhuis, S.M.
  10. A coordination game to elicit social networks: 3 classroom experiments By Pablo Brañas-Garza; Ramón Cobo-Reyes; Natalia Jiménez; Giovanni Ponti
  11. Networks of People in Specialty Production: Family Firms in the Iron and Steel Wire Industries in Spain (1870-2000) By Paloma Fernández Pérez
  12. The Industrial Organization of Markets with Two-Sided Platforms By David S. Evans; Richard Schmalensee
  13. Entry, Access Pricing, and Welfare in the Telecommunications Industry By Stefan Behringer
  14. Mapping Technological Trajectories as Patent Citation Networks. A Study on the History of Fuel Cell Research By Verspagen,Bart
  15. The Geographical Mobility of Mâori in New Zealand By Isabelle Sin; Steven Stillman

  1. By: Yann Bramoullé; Rachel Kranon
    Abstract: This paper considers the formation of risk-sharing networks. Following empirical findings, we build a model where risk-sharing takes place between pairs of individuals. We ask what structures emerge when pairs can agree to form links, but people cannot coordinate links across a population. We consider a benchmark model where identical individuals commit to share their monetary holdings equally with linked partners. We compare efficient networks to equilibrium networks. Efficient networks can (indirectly) connect all individuals and involve full insurance. However, equilibrium networks connect fewer individuals. There is an externality: when breaking a link individuals do not take into account the negative effect on others distant in the network. The network formation process can lead identical individuals to be in different positions and thus have different risk-sharing outcomes. These results may help explain empirical findings that risk-sharing is often not symmetric or complete.
    Keywords: Informal insurance, social networks
    JEL: O17 D85 Z13
    Date: 2005
  2. By: Calvó-Armengol, Antoni; Patacchini, Eleonora; Zenou, Yves
    Abstract: This paper studies whether structural properties of friendship networks affect individual outcomes in education and crime. We first develop a model that shows that, at the Nash equilibrium, the outcome of each individual embedded in a network is proportional to her Bonacich centrality measure. This measure takes into account both direct and indirect friends of each individual but puts less weight on her distant friends. Using a very detailed dataset of adolescent friendship networks, we show that, after controlling for observable individual characteristics and unobservable network specific factors, the individual's position in a network (as measured by her Bonacich centrality) is a key determinant of her level of activity. A standard deviation increase in the Bonacich centrality increases the level of individual delinquency by 45% of one standard deviation and the pupil school performance by 34% of one standard deviation.
    Keywords: centrality measure; delinquency; network structure; peer influence; school performance
    JEL: A14 I21 K42
    Date: 2005–09
  3. By: Goeree,Jacob K.; Riedl,Arno; Ule,Aljaz (METEOR)
    Abstract: This paper reports the results of a laboratory experiments on network formation among heterogeneous agents. The experimental design extends the basic Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by allowing for agents with lower linking costs or higher benefits to others. We consider treatments where agents’ types are common knowledge and treatments where agents’ types are private information. In all treatments, the (efficient) equilibrium network has a “star” structure. We find that with homogeneous agents, equilibrium predictions fail completely. In Contrast, with heterogeneous agents stars frequently occur, often with the high-value or low- cost agent in the center. Stars are not borne but rather develop: in treatments with a high-value agents, the network’s centrality, stability, and efficiency all increase over time. Our results suggest that agents’ heterogeneity is a major determinant for the predominance of star-like structures in real-life social networks.
    Keywords: microeconomics ;
    Date: 2005
  4. By: Joseph E. Harrington, Jr
    Abstract: Scientific progress is driven by innovation — which serves to produce a diversity of ideas — and imitation through a social network — which serves to diffuse these ideas. In this paper, we develop an agent-based computational model of this process, in which the agents in the population are heterogeneous in their abilities to innovate and imitate. The model incorporates three primary forces — the discovery of new ideas by those with superior abilities to innovate, the observation and adoption of these ideas by those with superior abilities to communicate and imitate, and the endogenous development of social networks among heterogeneous agents. The objective is to explore the evolving architecture of social networks and the critical roles that the innovators and imitators play in the process. A central finding is that the emergent social network takes a chainstructure with the innovators as the main source of ideas and the imitators as the connectors between the innovators and the masses. The impact of agent heterogeneity and environmental volatility on the network architecture is also characterized.
    Date: 2005–09
  5. By: Baalen, P.J. van; Bloemhof-Ruwaard, J.M.; Heck, E. van (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This article addresses the emergence of networks of practice and the role of knowledge sharing via knowledge portals. Its focus is on factors that stimulate the successful emergence of networks of practice. Literature on knowledge management and communities of practice suggest the preexistence of shared knowledge or a shared believe system as a condition sine qua non for the networks of practice to emerge. We challenge this assumption and argue and demonstrate that common knowledge and believe systems are rather a result of knowledge sharing instead of a pre-condition. The central question is how a knowledge portal facilitates the diffusion of knowledge among rather loosely coupled and often disconnected innovation projects. Research is carried out in the agricultural industry in the Netherlands. In this industry there is a need to change from a product-oriented to a problemoriented innovation structure. The set up of a platform and knowledge portal around agro-logistics – crossing different product-oriented production clusters – was therefore a logical result. It gave the opportunity to analyze what the impact of a knowledge portal is in a situation that people and projects come from different organizations that do not know each other. Do they start to share knowledge and what are the conditions? With regard to the case study of the knowledge portal in the agricultural industry we conclude that a knowledge portal will have an impact on how projects are sharing knowledge and on the emergence of a network of practice. The results show that preconditions for the emergence of a network of practice are sense of urgency and fragmented awareness. These results also indicate the important role of a knowledge broker. The developed knowledge portal seems to lead to overcoming structural holes and a closer cognitive distance among the projects. However, we did not find a direct effect of the knowledge portal on sharing tacit knowledge. In the initial phase of a network of practice the knowledge exchange seems to focus on general, non-project specific and explicit knowledge. There was also no direct effect of the knowledge portal on the reciprocity of knowledge exchange among the projects. However, knowledge was shared between the project level and the platform and public level. Conclusions and directions for future research are formulated.
    Keywords: Agro-logistics, Innovation Projects, Knowledge Portal, Knowledge;
    Date: 2005–03–08
  6. By: Beverly Hirtle
    Abstract: Despite recent innovations that might have reduced banks' reliance on brick-and-mortar branches for distributing retail financial services, the number of U.S. bank branches has continued to increase steadily over time. Further, an increasing percentage of these branches are held by banks with large branch networks. This paper assesses the implications of these developments by examining a series of simple branch performance measures and asking how these measures vary, on average, across institutions with different branch network sizes. ; The key findings are that banks with 100 to 500 branches ("mid-sized networks") had lower bank-average deposits per branch and roughly equal volumes of small business loans per branch, but no reduction in net deposit costs, relative to banks with larger branch networks. When compared to banks with 100 or fewer branches, mid-sized branch networks had lower bank-average deposits and small business loan volume per branch, but had lower net deposit costs. The analysis shows no systematic relationship between branch network size and overall institutional profitability. The results imply that mid-sized branch networks may be at a competitive disadvantage, especially relative to the very largest branch networks.
    Keywords: Branch banks ; Bank profits
    Date: 2005
  7. By: Stefan Behringer (Economics Department, Frankfurt University)
    Abstract: This paper looks at competition in the telecommunication industry. We determine the equilibrium pricing parameters for a duopoly situation with a particular emphasis on the role of competitively chosen non-reciprocal access prices. In the symmetric equilibrium the networks optimally choose positive access charge markups which reconciles empirical observation with the theoretical economics literature.
    Date: 2005–07
  8. By: Doh-Shin Jeon
    Abstract: In this paper, I consider a general and informationally effcient approach to determine the optimal access rule and show that there exists a simple rule that achieves the Ramsey outcome as the unique equilibrium when networks compete in linear prices without network-based price discrimination. My approach is informationally effcient in the sense that the regulator is required to know only the marginal cost structure, i.e. the marginal cost of making and terminating a call. The approach is general in that access prices can depend not only on the marginal costs but also on the retail prices, which can be observed by consumers and therefore by the regulator as well. In particular, I consider the set of linear access pricing rules which includes any fixed access price, the Efficient Component Pricing Rule (ECPR) and the Modified ECPR as special cases. I show that in this set, there is a unique access rule that achieves the Ramsey outcome as the unique equilibrium as long as there exists at least a mild degree of substitutability among networks' services.
    Keywords: Networks, Access Pricing, Interconnection, Competition Policy
    JEL: D4 K21 L41 L51 L96
    Date: 2005–02
  9. By: Wijk, R.A.J.L. van; Bosch, F.A.J. van den; Volberda, H.W.; Heinhuis, S.M. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Fundamental changes in the competitive landscape triggered many firms to leverage and build competencies by focusing on transition processes towards internal network forms of organizing. These forms ameliorate exploration through knowledge creation and transfer. Internal networks are characterized by horizontal knowledge flows that supplement and supplant the vertical knowledge flows that characterize other organization forms like the functional and multi-divisional forms. As these horizontal knowledge flows facilitate knowledge integration, internal networks have an advantage over other organization forms in leveraging and building competencies. One characteristic that makes these horizontal knowledge flows work is the reciprocity ensuing them. Reciprocity relates to the interdependence and coordination modes that characterize internal networks. As reciprocity is influenced by managerial coordination, by the intention to deploy knowledge, and by goal attainment, creating and maintaining reciprocity of knowledge flows can be considered as a managerial competence. In this paper, the attributes of organization form that impact the reciprocity in a firm are explored from structural, managerial and knowledge perspectives. Hypotheses are developed which suggest that specialization and the use of formal meetings restrict reciprocity, whereas job rotation, the number of employees with a coordination function, and teams have a positive effect on the level of reciprocity. These hypotheses are tested by means of a questionnaire administered in a business unit of a multinational financial services firm. Reciprocity of knowledge flows was found to be dependent on the characteristics mentioned above in a predicted way. Since none of the hypotheses needed to be rejected, the evidence suggests that reciprocity is a fundamental feature of internal networks and the horizontal knowledge flows that characterize them. This suggests reciprocity to be an important managerial competence.
    Keywords: Competence leveraging and building;Internal networks;Organizational attributes;Reciprocity of knowledge flows;Knowledge integration;
    Date: 2005–05–10
  10. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada); Ramón Cobo-Reyes (Department of Economic Theory and Economic History, University of Granada); Natalia Jiménez (Universidad de Alicante); Giovanni Ponti (Universidad de Alicante)
    Abstract: Experiments of social networks basically focus on coordination and cooperation games. Surprisingly, the economic literature does not provide a useful procedure to obtain existent networks. This paper proposes an innovative mechanism to elicit latent social networks. Subjects belonging to three different groups are invited to reveal their friends’ name and surname. In addition, they also have to define a score for each relationship. The latter, is one of the main innovations of our device. We obtained that a very large percentage of links sent are corresponded. According to our original purpose, this mechanism largely captures friendship relations and practically ignores weak relations. In order to further analyze individuals behavior, a model of friend—regarding preferences is developed.
    Keywords: friendship, networks, experiments, other—regarding preferences.
    JEL: C93 D85 Z13
    Date: 2005–09–12
  11. By: Paloma Fernández Pérez (Universitat de Barcelona)
    Abstract: Capital intensive industries in specialized niches of production have constituted solid ground for family firms in Spain , as evidenced by the experience of the iron and steel wire industries between 1870 and 2000. The embeddedness of these firms in their local and regional environments have allowed the creation of networks that, together with favourable institutional conditions, significantly explain the dominance of family entrepreneurship in iron and steel wire manufacturing in Spain, until the end of the 20 th century. Dominance of family firms at the regional level has not been not an obstacle for innovation in wire manufacturing in Spain, which has taken place even when institutional conditions blocked innovation and traditional networking. Therefore, economic theories about the difficulties dynastic family firms may have to perform appropriately in science-based industries must be questioned.
    Keywords: Family Firms, Steel Wire Industries, Spanish Economic History
    JEL: N63 N64 N83 N84
    Date: 2005
  12. By: David S. Evans; Richard Schmalensee
    Abstract: Two-sided platforms (2SPs) cater to two or more distinct groups of customers, facilitating value-creating interactions between them. The village market and the village matchmaker were 2SPs; eBay and are more recent examples. Other examples include payment card systems, magazines, shopping malls, and personal computer operating systems. Building on the seminal work of Rochet and Tirole (2003), a rapidly growing literature has illuminated the economic principles that apply to 2SPs generally. One key result is that 2SPs may find it profit-maximizing to charge prices for one customer group that are below marginal cost or even negative, and such skewed pricing pattern is prevalent, although not universal, in industries that appear to be based on 2SPs. Over the years, courts have also recognized that certain industries, notably payment card systems and newspapers, now understood to be based on 2SPs, are governed by unusual economic relationships. This chapter provides an introduction to the economics of 2SPs and its application to several competition policy issues.
    JEL: D4 L1 L4
    Date: 2005–09
  13. By: Stefan Behringer (Economics Department, Frankfurt University)
    Abstract: This paper looks at the effects of entry on welfare in the telecommunication industry. The equilibrium pricing parameters for an incumbent (state) monopoly and for a duopoly situation are determined in which access charges are chosen non-reciprocally. A welfare comparison between the monopoly and duopoly equilibrium situation is undertaken and the welfare consequences of alternative access pricing regimes are investigated.
    Date: 2005–07
  14. By: Verspagen,Bart (MERIT)
    Abstract: Technological change is argued to be taking place along ordered and selective pat-terns, shaped jointly by technological and scientific principles, and economic and other societal factors. Historical, descriptive analysis is often used to analyze these ''trajectories''. Recently, quantitative methods have been proposed to map these tra-jectories. It is argued that such methods have, so far, not been able to illuminate the engineering side of technological trajectories. In order to fill this gap, a methodology proposed by Hummon and Doreian (1989) is used and extended to undertake a cita-tion analysis of patents in the field of fuel cells.
    Keywords: research and development ;
    Date: 2005
  15. By: Isabelle Sin (Motu Economic & Public Policy Research); Steven Stillman (Motu Economic & Public Policy Research)
    Abstract: This paper describes the geographical location and internal mobility of the Mâori ethnic group in New Zealand between 1991 and 2001. It is often suggested that Mâori are less mobile than other ethnic groups because of attachment to particular geographical locations. We compare the mobility of Mâori in particular locations to the mobility of similar Europeans in those same locations and find that, contrary to this anecdotal evidence, most Mâori are, on average, more mobile than Europeans in New Zealand. We do find that the roughly forty percent of Mâori who live in areas local to their iwi (tribe) are less mobile than comparable Europeans in those same areas. Defining local areas both based on both traditional iwi locations and current iwi populations, we find suggestive evidence that social ties are more important than land-based attachment in explaining why these Mâori are relatively less mobile, but that land- based attachment is also an important impediment to mobility.
    Keywords: Mobility, Migration, Social Networks, New Zealand, Mâori, Labour Market Areas
    JEL: J15 J62 R23
    Date: 2005–09–12

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