nep-net New Economics Papers
on Network Economics
Issue of 2006‒12‒16
eleven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Interconnection and competition among asymmetric networks in the internet backbone market By Jahn,Eric; Pruefer,Jens
  2. Incompatibility and investment in ATM networks By Timothy H. Hannan; Ron Borzekowski
  3. Coordination failures in network formation. By Nicolas Carayol; Pascale Roux; Murat Yıldızoglu
  4. Vertical Production Networks: Evidence from France By Michel Fouquin; Laurence Nayman; Laurent Wagner
  5. Strategic online-banking adoption By Roberto Fuentes; Rubén Hernández-Murillo; Gerard Llobet
  6. Segregation in Networks. By Giorgio Fagiolo; Marco Valente; Nicolaas J. Vriend
  7. Skilled Migration and Business Networks By Fredéric, DOCQUIER; Elisabetta, LODIGINI
  8. Competing for Customers in a Social Network By Pradeep Dubey; Rahul Garg; Bernard De Meyer
  9. Altruism with Social Roots: An Emerging Literature. By Pablo Brañas-Garza; Maria Paz Espinosa
  10. Intermediation and investment incentives By Paul, BELLEFLAMME; Martin PEITZ
  11. Games of Connectivity By Pradeep Dubey; Rahul Garg

  1. By: Jahn,Eric; Pruefer,Jens (Tilburg University, Center for Economic Research)
    Abstract: We examine the interrelation between interconnection and competition in the internet backbone market. Networks asymmetric in size choose among different interconnection regimes and compete for end-users. We show that a direct interconnection regime, Peering, softens competition compared to indirect interconnection since asymmetries become less influential when networks peer. If interconnection fees are paid, the smaller network pays the larger one. Sufficiently symmetric networks enter a Peering agreement while others use an intermediary network for exchanging traffic. This is in line with considerations of a non-US policy maker. In contrast, US policy makers prefer Peerings among relatively asymmetric networks.
    Keywords: Internet Backbone;Endogenous Network Interconnection;Asymmetric Networks; Two-Way Access Pricing
    JEL: L10 L96 D43
    Date: 2006
  2. By: Timothy H. Hannan; Ron Borzekowski
    Abstract: The literature on network industries and network effects notes that incompatibility across rival systems can influence firms' incentives to invest in product changes that are beneficial to the consumer. We investigate this phenomenon in the case of bank ATM networks, where the number of ATM locations serves as the measure of product quality and surcharge fees serve as an index of incompatibility. Using as a natural experiment the lifting of a surcharge ban in Iowa (and not in neighboring states), we find that the associated increase in incompatibility for Iowa banks caused a substantial increase in the number of ATM locations offered to customers. This effect is found to be larger (in percentage terms) for larger banks than for smaller ones.
    Date: 2006
  3. By: Nicolas Carayol; Pascale Roux; Murat Yıldızoglu
    Abstract: In this paper, we make an exploratory use of numerical techniques (genetic algorithms and Monte Carlo simulations) to compute efficient and emergent networks in a spatialized version of the connections model of Jackson and Wolinski (1996). This approach allows us to observe and discuss the coordination failures that arise in a strategic network formation context with link-mediated positive externalities to connections and geographically based connection costs. Our results highlight that, depending on the strength of the externalities, emergent and efficient networks may share several structural properties. Nevertheless, emergent networks have too few local and distant connections and are also too less “coordinated” around some central agents than they should.
    Keywords: Strategic Network Formation; Efficiency; Stability; Coordination; Small Worlds; Genetic Algorithms; Monte Carlo Simulations.
    Date: 2006
  4. By: Michel Fouquin; Laurence Nayman; Laurent Wagner
    Abstract: This paper investigates the determinants of intra-firm trade of multinational firms located in France, using data on French companies. Results on the vertical pattern of production networks differ according to the affiliates’ location. Lower wage and transportation costs in the developing countries increase, as expected, the vertical segmentation of production. In the developed countries, lower trade and unit wage costs, and hence, a strong and positive labour productivity matter a lot in explaining French MNCs’ preferences. Among the other variables of interest, partnership and market potential have been given special attention. The results substantiate a mix of vertical and horizontal FDI, mainly when we separate out capital intensive from labour intensive intermediate products.
    Keywords: Multinational firms; intra-firm trade; intermediate products; vertical production networks; horizontal FDI; globalization; segmentation; productivity; international comparison; factor costs
    JEL: F23 F10 L10
    Date: 2006–11
  5. By: Roberto Fuentes; Rubén Hernández-Murillo; Gerard Llobet
    Abstract: In this paper we study the determinants of the decision of U.S. banks to create a transactional website for their customers. We show that although bank-specific characteristics (such as the volume of deposits) are important, competition plays a prominent role. In more competitive markets banks are more likely to adopt earlier. Even more important, banks adopt earlier in markets where their competitors have already adopted. A contribution of this paper is to study the adoption decision over time using a panel of commercial banks. We also contribute to the literature by adapting a measure of competition related to the choices of competitors that a bank faces in each market.
    Keywords: Internet banking
    Date: 2006
  6. By: Giorgio Fagiolo; Marco Valente; Nicolaas J. Vriend
    Abstract: Schelling (1969, 1971a,b, 1978) considered a simple model with individual agents who only care about the types of people living in their own local neighborhood. The spatial structure was represented by a one- or two-dimensional lattice. Schelling showed that an integrated society will generally unravel into a rather segregated one even though no individual agent strictly prefers this. We make a first step to generalize the spatial proximity model to a proximity model of segregation. That is, we examine models with individual agents who interact ’locally’ in a range of network structures with topological properties that are different from those of regular lattices. Assuming mild preferences about with whom they interact, we study best-response dynamics in random and regular non-directed graphs as well as in small-world and scale-free networks. Our main result is that the system attains levels of segregation that are in line with those reached in the lattice-based spatial proximity model. In other words, mild proximity preferences can explain segregation not just in regular spatial networks but also in more general social networks. Furthermore, segregation levels do not dramatically vary across different network structures. That is, Schelling’s original results seem to be robust also to the structural properties of the network.
    Keywords: Spatial proximity model, Social segregation, Schelling, Proximity preferences, Social networks, Undirected graphs, Best-response dynamics.
    JEL: C72 C73 D62
    Date: 2005
  7. By: Fredéric, DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Elisabetta, LODIGINI (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: The role of migrants’ networks in promoting cross border investments has been stressed in the literature, possibly making migration and FDI complements rather than substitutes in the long run. In this paper, we estimate the magnitude of such business network externalities in dynamic empirical models of FDI-funded capital accumulation. We use original data on capital and migration stocks rather than flows. Regarding migrants, we distinquish the total and the skilled diasporas abroad. In both cross-sectional and panel frameworks, we find evidence of strong network externalities, mainly associated to the skilled diaspora. These network externalities are stronger for countries exhibiting intermediate corruption index.
    Keywords: FD1, Migration, Brain Drain, Network, Diaspo
    JEL: F2 O15 Z13
    Date: 2006–10–11
  8. By: Pradeep Dubey; Rahul Garg; Bernard De Meyer
    Date: 2006–12–08
  9. By: Pablo Brañas-Garza (Universidad de Granada); Maria Paz Espinosa (Universidad del País Vasco)
    Abstract: This paper analyzes the emerging literature on the determinants of giving within a social network. We propose two main explanatory variables for previous experimental results on the friendship e¤ect. The first is social integration, which has a positive impact on giving. The second variable is strategic and is based on reciprocity: the possibility of ex-post favors. Econometric analysis shows that both variables play a positive (and significant) role.
    Keywords: giving, social networks, reciprocity, social integration.
    JEL: C91 D64 Z13
    Date: 2006–12–05
  10. By: Paul, BELLEFLAMME (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Martin PEITZ (University of Mannheim)
    Abstract: We analyze whether and how the fact that products are not sold on free, public, platforms but on competing for-profit platforms affects sellers’ investment incentives. Investments in cost reduction, quality, or marketing measures are here to joint and coordinated efforts by sellers. We show that, in general, for-profit intermediation is not neutral to such investment incentives. As for-profit intermediaries reduce the rents that are availale in the market, one might suspect that sellers have weaker investment incentives with competing for-profit platforms. However, this is not necessarily the case. The reason is that investment incentives affect the size of the network effects and thus competition between intermediaries. In particular, we show that whether for-profit intermediation raises or lowers investment incentives depends on which side of the market singlehomes
    Keywords: Two-Sided Maarkets, Network Effects, Intermediation, Investment Incentives
    JEL: L10 D40
    Date: 2006–09–15
  11. By: Pradeep Dubey; Rahul Garg
    Date: 2006–12–08

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