nep-net New Economics Papers
on Network Economics
Issue of 2005‒12‒14
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. International R&D Collaboration Networks By Huasheng, SONG; Vincent, VANNETELBOSCH
  2. Network Potentials By Subhadip Chakrabarti; Robert P. Gilles
  3. Networks of Manufacturers and Retailers By Ana, MAULEON; José, SEMPERE-MONERRIS; Vincent, VANNETELBOSCH
  4. Lessons from International Experience with Electricity Market Monitoring By Frank A. Wolak

  1. By: Huasheng, SONG; Vincent, VANNETELBOSCH
    Abstract: We reconsider Goyal and Moraga-Gonzalez (Rand J. of Econ. 32 (2001), 686-707) model of strategic networks in order to analyze how government policies (e.g. subsidies) will affect the stability and efficiency of networks of R&D collaboration among three firms located in different countries. A conflict between stability and efficiency is likely to occur. When governments cannot subsidize R&D, this conflict will occur if public spillovers are not very small. However, when governments can subsidize R&D, the likelihood of a conflict is considerably reduced. Indeed, a conflict will arise only if public spillovers are very small or quite large.
    Keywords: Network; R&D collaboration; Subsidy
    JEL: C70 F13 L13 L20
    Date: 2005–05–15
  2. By: Subhadip Chakrabarti; Robert P. Gilles
    Abstract: A network payoff function assigns a utility to all participants in a (social) network. In this paper we discuss properties of such network payoff functions that guarantee the existence of certain types of pairwise stable networks and the convergence of certain network formation processes. In particular we investigate network payoff functions that admit an exact network potential or an ordinal network potential. We relate these network potentials to exact and ordinal potentials of a non-cooperative network formation game based on consent in link formation. Our main results extend and strengthen the current insights in the literature on game theoretic approaches to social network formation.
    Keywords: Network formation; pairwise stability; potential functions
    JEL: C72 C79 D85
    Date: 2005–10
    Abstract: We study the endogenous formation of networks between manufacturers of differentiated goods and multi-product retailers who interact in a successive duopoly. Joint consent is needed to establish and/or maintain a costly link between a manufacturer and a retailer. We find that only three distribution networks are stable for particular values of the degree of product differentiation and link costs : (i) the non-exclusive distribtion & non-exclusive dealing network in which both retailers distribute both products is stable for intermediate degree of product differentiation and small link costs; (ii) the exclusive distribution & exclusive dealing network in which each retailer distributes a different product is stable for low degrees of product differentiation; (iii) the mixed distribution network in which one retailer distributes both products while the other retailer sells only one is stable for high degrees of product differentiation and large link costs. We show that the distribution networks that maximize social welfare are not necessarily stable. Thus, a conflict between stability and social welfare is likely to occur, even more if the degree of product differentiation is either low or high.
    Keywords: Networks; Retailers; Manufacturers
    JEL: C70 L13 L20 J50 J52
    Date: 2005–06–15
  4. By: Frank A. Wolak (Stanford University)
    Abstract: The author first describes those features of the electricity supply industry that make a prospective market monitoring process essential to a well-functioning wholesale market. Some of these features are shared with the securities industry, although the technology of electricity production and delivery make a reliable transmission network a necessary condition for an efficient wholesale market. These features of the electricity supply industry also make antitrust or competition law alone an inadequate foundation for an electricity market monitoring process. The author provides examples of both the successes and failures of market monitoring from several international markets. More than 10 years of experience with the electricity industry restructuring process has shown that market failures are more likely and substantially more harmful to consumers than other market failures because of how electricity is produced and delivered and the crucial role it plays in the modern economy. Wholesale market meltdowns of varying magnitudes and durations have occurred in electricity markets around the world, and many of them could have been prevented if a prospective market monitoring process backed by the prevailing regulatory authority had been in place at the start of the market.
    Keywords: Infrastructure
    Date: 2005–09–01

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