nep-net New Economics Papers
on Network Economics
Issue of 2007‒02‒17
ten papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Public Policy in Network Industries By Nicholas Economides
  2. Taxation in Two-Sided Markets By Kind, Hans Jarle; Koethenbuerger, Marko; Schjelderup, Guttorm
  3. Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification By Harald Uhlig
  4. Gurus, Opinion Polls and Social Learning By Nicolas Melissas
  5. Values on regular games under Kirchhoff's laws. By Fabien Lange; Michel Grabisch
  6. Efficiency and Productivity Analysis in Regulation and Governance By Thomas Weyman-Jones
  7. Outside board members in the high-tech start-ups By Clarysse, B.; Knockaert, M.; Lockett, A.
  8. Universal Service Obligations: The Role of Subsidization Schemes and the Consequences of Accounting Separation By François MIRABEL; Jean-Christophe POUDOU; Michel ROLAND
  9. Lost in Translation Empirical Evidence for Liability of Foreignness as a Barrier to Knowledge Spillovers By Schmidt, Tobias; Sofka, Wolfgang
  10. Random intersection graphs with tunable degree distribution and clustering By Deijfen,Maria; Kets,Willemien

  1. By: Nicholas Economides
    Date: 2006
  2. By: Kind, Hans Jarle (Dept. of Economics, Norwegian School of Economics and Business Administration); Koethenbuerger, Marko (Center for Economic Studies, Ludwig-Maximilians-Universität); Schjelderup, Guttorm (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: Two-sided platform firms serve distinct customer groups that are connected through interdependent demand, and include major businesses such as the media industry, banking, and the software industry. A well known textbook result in one-sided markets is that a government may increase a monopolist’s output and reduce the deadweight loss by subsidizing output. The present paper shows that this result need not hold in a two-sided market. On the contrary, a higher advalorem tax rate - rather than a subsidy - could increase output and enhance welfare.
    Keywords: Two-sided markets; ad-valorem taxes; specific taxes; imperfect competition; industrial organization
    JEL: D40 D43 H21 H22 L13
    Date: 2007–02–13
  3. By: Harald Uhlig
    Abstract: This paper analyzes the cost of disinflation under real wage rigidities in a micro-founded New Keynesian model. Unlike Blanchard and Galí (2007) who carried out a similar analysis in a linearized framework, we take non-linearities into account. We show that the results change dramatically, both qualitatively and quantitatively, for the steady states and for the dynamic adjustment paths. In particular, a disinflation implies a prolonged slump without any need for real wage rigidities.
    Keywords: Disinflation, Sticky Prices, Real Rigidities
    JEL: E31 E52
    Date: 2007–02
  4. By: Nicolas Melissas (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: This paper analyzes cheap talk in an investment model with information externalities. In contrast to Gossner and Melissas (2006), I allow for (i) competition effects, (ii) positive network externalities and (iii) more than one interviewed player. In the presence of competition effects, a player will never truthfully reveal her information about the realized state of the world. In the presence of positive network externalities, however, there exists a parameter range where, under mild additional conditions, the unique equilibrium is the separating one. Finally, using numerical computations, I show that for a sufficiently large number of interviewed players there exists a separating equilibrium in my entire parameter range.
    Keywords: Cheap Talk,Information Externality, Social Learning, Herd Behaviour
    JEL: D62 D83
    Date: 2007–01
  5. By: Fabien Lange (Centre d'Economie de la Sorbonne); Michel Grabisch (Centre d'Economie de la Sorbonne)
    Abstract: In cooperative game theory, the Shapley value is a central notion defining a rational way to share the total worth of a game among players. In this paper, we address a general framework, namely regular set systems, where the set of feasible coalitions forms a poset where all maximal chains have the same length. We first show that previous definitions and axiomatizations of the Shaphey value proposed by Faigle and Kern and Bilbao and Edelman still work. our main contribution is then to propose a new axiomatization avoiding the hierarchical strength axiom of Faigle and Kern, and considering a new way to define the symmetry among players. Borrowing ideas from electric networks theory, we show that our symmetry axiom and the classical efficiency axiom correspond actually to the two Kirchhoff's laws in the resistor circuit associated to the Hasse diagram of feasible coalitions. We finally work out a weak form of the monotonicity axiom which is satisfied by the proposed value.
    Keywords: Regular set systems, regular games, Shapley value, probalistic efficient values, regular values, Kirchhoff's laws.
    JEL: C71
    Date: 2006–12
  6. By: Thomas Weyman-Jones (Dept of Economics, Loughborough University)
    Abstract: This paper surveys the application of efficiency and productivity analysis to recent regulatory experience, especially in Europe. From a review of regulatory case studies, particularly of network industries, it is clear that regulatory practice differs from theoretical precedent in choice of methodology, sample size, model specification and price or revenue control implementation. A principal-agent model of linear regulatory contracts is used to understand this discrepancy, suggesting that efficiency and productivity analysis has been used to capture economic rent rather than to provide incentives for efficiency. Predictions of the model are used to investigate other assumptions in efficiency and productivity analysis.
    Keywords: regulation, data envelopment analysis, stochastic frontier analysis.
    JEL: D24 L25 L51
    Date: 2007–01
  7. By: Clarysse, B.; Knockaert, M.; Lockett, A.
    Abstract: Board composition in large organizations has been subject to much empirical research, however, little attention has been focused on board composition in start-ups, and more specifically high tech start-ups. This lack of research is surprising given that many high tech start-ups have multiple equity stakeholders such as venture capitalists or public research organizations, such as universities. Given that high tech start-ups are commonly resource-poor these external stakeholders may play an important role in accessing critical external resources. Drawing on agency theory, resource dependence theory and social network theory we examine the tensions that exist between the founding team and external equity stakeholders in determining the presence of outside board members. In particular we focus on whether or not the outside board members have either complementary or substitute human capital to the founding team. We test our model on a sample of 140 high tech start-ups in Flanders. Our results indicate that high tech start-ups with a public research organization as an external equity stakeholder are more likely to develop boards with outside board members with complementary skills to the founding team. Conversely, in high tech start-ups where the founding team has had autonomy, or where a venture capitalist is an external equity stakeholder, the board tends to consist of outside board members with similar or substitute human capital to the founding team. Our findings the presence of an external equity stakeholder does not guarantee that outside board members have complementary human capital to the founding team.
    Date: 2006–10–04
  8. By: François MIRABEL; Jean-Christophe POUDOU; Michel ROLAND
    Abstract: This paper (i) highlights the role that unit subsidies can play in the compensation scheme of a Universal Service Obligation (USO), and (ii) shows that welfare may be reduced when regulation requires accounting separation of network activities for vertically integrated USO providers. This suggests that accounting separation should be avoided when a USO is implemented.
    Keywords: Universal Service Obligations, Network Industries, Regulation.
    JEL: L43 L51 L52
    Date: 2007
  9. By: Schmidt, Tobias; Sofka, Wolfgang
    Abstract: Entering host country networks of knowledge flows (new competencies, innovative technologies, and lead-market knowledge) is a major rationale of multinational firms for investing abroad. Foreign firms find it difficult to overcome cultural and social barriers which make their foreign engagements more strenuous and error prone (liability of foreignness). In our analysis we break down the complex mechanisms behind knowledge spillovers and identify conceptual links with liability of foreignness. We hypothesise that liability of foreignness acts as a filter for foreign firms, restricting their access to host country knowledge. We use a broad sample of roughly 1,000 firms in Germany to empirically test the existence of liabilities of foreignness in leveraging knowledge spillovers. Our particular setting allows us to distinguish between upstream (suppliers, academia) and downstream (customers) liabilities of foreignness. We find that multinational firms can compete on an equal footing with host country rivals when it comes to generating impulses for innovations from suppliers and academia. They are significantly challenged by liabilities of foreignness, though, where customers are involved. We suggest that the frictional losses from a lack of social and cultural embeddedness (liability of foreignness) in the host country are especially relevant when promising lead customers have to be identified and their tacit and often unarticulated impulses have to be transferred, understood and prioritised.
    Keywords: Liability of foreignness, knowledge spillover, globalisation, trivariate probit
    JEL: D83 F23 O31 O32
    Date: 2006
  10. By: Deijfen,Maria; Kets,Willemien (Tilburg University, Center for Economic Research)
    Abstract: A random intersection graph is constructed by independently assigning each vertex a subset of a given set and drawing an edge between two vertices if and only if their respective subsets intersect. In this paper a model is developed in which each vertex is given a random weight, and vertices with larger weights are more likely to be assigned large subsets. The distribution of the degree of a given vertex is determined and is shown to depend on the weight of the vertex. In particular, if the weight distribution is a power law, the degree distribution will be so as well. Furthermore, an asymptotic expression for the clustering in the graph is derived. By tuning the parameters of the model, it is possible to generate a graph with arbitrary clustering, expected degree and { in the power law case { tail exponent.
    Keywords: random intersection graphs;degree distribution;power law distribution; clustering;social networks
    JEL: C65 Z13
    Date: 2007

This nep-net issue is ©2007 by Yi-Nung Yang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.