nep-net New Economics Papers
on Network Economics
Issue of 2006‒10‒07
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. NETWORK SIZE AND NETWORK CAPTURE By Gerard Llobet; Michael Manove
  2. Two-Sided Markets with Pecuniary and Participation Externalities By Richard Schmidtke
  3. Bicriterion a priori route choice in stochastic time-dependent networks. By Nielsen, Lars Relund; Andersen, Kim Allan; Pretolani, Daniele
  4. Social Norms and Conditional Cooperative Taxpayers By Traxler, Christian

  1. By: Gerard Llobet; Michael Manove (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: Most types of networks, over time, spawn the creation of complementary stocks that enhance network value. Computer operating systems, for example, induce the development of the complementary stock of software applications that increase the value of the operating system. In this paper, we challenge the conventional wisdom that a large network, which induces the creation of large complementary stocks, serves as a barrier to entry that protects the incumbent from competition or network capture. We show that a larger network may either deter or attract entry depending on the relation between the network quality and the cost of an innovator's network product. The probability of entry also depends on the level of compatibility between the potential entrant's technology and existing complementary stocks, which in turn is influenced by the strength of the intellectual-property-rigths environment. Intellectual property rigths and the associated threat of entry may affect and incumbent's choice of network size in counterintuitive ways.
    JEL: L41 O34
    Date: 2006–04
  2. By: Richard Schmidtke
    Abstract: The existing literature on "two-sided markets" addresses participation externalities, but so far it has neglected pecuniary externalities between competing platforms. In this paper we build a model that incorporates both externalities. In our setup differentiated platforms compete in advertising and offer consumers a service free of charge (such as a TV program) that is financed through advertising. We show that advertising can exhibit the properties of a strategic substitute or complement. Surprisingly, there exist cases in which platforms benefit from market entry. Moreover, we show that from a welfare point of view perfect competition is not always desirable.
    Keywords: two-sided markets, broadcasting, advertising, market entry, digital television
    JEL: D43 L13 L82
    Date: 2006
  3. By: Nielsen, Lars Relund (Research Unit of Statistics and Decision Analysis); Andersen, Kim Allan (Department of Management Science and Logistics, Aarhus School of Business); Pretolani, Daniele (Department of Sciences and Methods of Engineering)
    Abstract: In recent years there has been a growing interest in using stochastic time-dependent (STD) networks as a modelling tool for a number of applications within such areas as transportation and telecommunications. It is known that an optimal routing policy does not necessarily correspond to a path, but rather to a time-adaptive strategy. In some applications, however, it makes good sense to require that the routing policy corresponds to a loopless path in the network, that is, the time-adaptive aspect disappears and a priori route choice is considered. <p> In this paper we consider bicriterion a priori route choice in STD networks, i.e. the problem of finding the set of efficient paths. Both expectation and min-max criteria are considered and a solution method based on the two-phase approach is devised. Experimental results reveal that the full set of efficient solutions can be determined on rather large test instances, which is in contrast to previously reported results for the time-adaptive case
    Keywords: Stochastic time-dependent networks; Bicriterion shortest path; A priori route choice; Two-phase method
    Date: 2006–09–18
  4. By: Traxler, Christian
    Abstract: This paper incorporates tax morale into the Allingham Sandmo (1972) model of income tax evasion. Tax morale is interpreted as a social norm for tax compliance. The norm strength, depending on the share of evaders in the society, is endogenously derived. Taxpayers act conditionally cooperative, as their evasion decision depends on the other agents' compliance. We characterize an equilibrium which accounts for this interdependence and study the impact of tax and deterrence policies on compliance. Our analysis is then extended to the case of a society which consists of heterogenous communities where individual evasion decisions are embedded in a complex social structure. In this scenario, behavior is crucially influenced by the norm compliance among morale reference groups. Within this framework, we discuss the role of belief management and belief leadership as alternative policy tools.
    Keywords: Tax Evasion; Tax Morale; Social Norms; Conditional Cooperation
    JEL: H26 Z13 K42
    Date: 2006–09

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