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on Network Economics |
| By: | Chiao, Benjamin; Lerner, Josh; Tirole, Jean |
| Abstract: | This paper empirically explores standard-setting organizations’ policy choices. Consistent with Lerner-Tirole (2006), we find (a) a negative relationship between the extent to which an SSO is oriented to technology sponsors and the concession level required of sponsors and (b) a positive correlation between the sponsor-friendliness of the selected SSO and the quality of the standard. We also develop and test two extensions of the earlier model: the presence of provisions mandating royalty-free licensing is negatively associated with disclosure requirements, and the relationship between concessions and user friendliness is weaker when there is only a limited number of SSOs. |
| Keywords: | forum shopping; innovation; licensing; standardization |
| JEL: | L2 O3 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6141&r=net |
| By: | Geoffroy de Clippel; Roberto Serrano |
| Abstract: | Our concern is the extension of the theory of the Shapley value to games with externalities. Using the standard axiom systems behind the Shapley value for an arbitrary exogenous coalition structure leads to the identification of bounds on players’ payoffs around an \"externality-free\" value. In endogenizing the coalition structure, we analyze a two-stage process of coalition formation in whose second stage our axiomatic results are applied. We find reasons to explain inefficient coalition structures, and provide sufficient conditions for efficiency. |
| Keywords: | externalities; marginal contributions; Shapley value; Pigouvian transfers; coalition formation |
| JEL: | C7 D62 |
| Date: | 2007–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:imd:wpaper:wp2007-04&r=net |
| By: | Rochet, Jean Charles; Tirole, Jean |
| Abstract: | Payment card associations offer both debit and credit cards and, until recently, engaged in a tie-in on the merchant side through the so-called honour-all-cards (HAC) rule. The HAC rule came under attack on the grounds that the credit and debit card markets are separate markets and that the associations lever their market power in the 'credit card market' to exclude on-line debit cards and thereby monopolize the 'debit card market'. This article analyzes the impact of the HAC rule, using a simple model with two types of transactions (debit and credit) and two platforms. In the benchmark model, in the absence of HAC rule, the interchange fee (IF, the transfer from the merchant’s bank to the cardholder’s bank) on debit is socially too low, and that on credit is either optimal or too high (depending on downstream members’ market power). In either case, the HAC rule not only benefits the multi-card platform but also raises social welfare, due to a rebalancing effect: The HAC rule allows the multi-card platform to better perform the balancing act by raising the IF on debit and lowering it on credit, ultimately raising volume. The paper then investigates a number of extensions of the benchmark model, including varying degrees of substitutability between debit and credit; merchant heterogeneity; and platform differentiation. While the HAC rule may no longer raise social welfare under all values of the parameters, the basic and socially beneficial rebalancing effect unveiled in the benchmark model is robust. |
| Keywords: | payment cards; price rebalancing.; tie-ins; two-sided markets |
| JEL: | L5 L82 L86 L96 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6132&r=net |
| By: | Mark Carlson; Kris James Mitchener |
| Abstract: | Because California was a pioneer in the development of intrastate branching, we use its experience during the 1920s and 1930s to assess the effects of the expansion of large-scale, branch-banking networks on competition and the stability of banking systems. Using a new database of individual bank balance sheets, income statements, and branch establishment, we examine the characteristics that made a bank a more likely target of a takeover by a large branching network, how incumbent unit banks responded to the entry of branch banks, and how branching networks affected the probability of survival of banks during the Great Depression. We find no evidence that branching networks expanded by acquiring "lemons"; rather those displaying characteristics of more profitable institutions were more likely targets for acquisition. We show that incumbent, unit banks responded to increased competition from branch banks by changing their operations in ways consistent with efforts to increase efficiency and profitability. Results from survivorship analysis suggest that unit banks competing with branch bank networks, especially with the Bank of America, were more likely to survive the Great Depression than unit banks that did not face competition from branching networks. Our statistical findings thus support the hypothesis that branch banking produces an externality in that it improves the stability of banking systems by increasing competition and forcing incumbent banks to become more efficient. |
| JEL: | E44 G21 L1 N22 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12938&r=net |
| By: | Chantarat, Sommarat; Barrett, Christopher B. |
| Abstract: | The paper explores the role social network capital might play in facilitating poor agents’ escape from poverty traps. We model endogenous network formation among households heterogeneously endowed with both traditional and social network capital who make investment and technology choices over time in the absence of financial markets and faced with multiple production technologies featuring different fixed costs and returns. We show that social network capital can serve as either a complement to or a substitute for productive assets in facilitating some poor households’ escape from poverty. However, the voluntary nature of costly social network formation also creates both involuntary and voluntary exclusionary mechanisms that impede some poor households’ efforts to exit poverty. The ameliorative potential of social networks therefore depends fundamentally on the underlying wealth distribution in the economy. In some settings, targeted public transfers to the poor can crowd-in private resources by inducing new social links that the poor can exploit to escape from poverty. |
| Keywords: | social network capital; endogenous network formation; poverty traps; multiple equilibria; social isolation; social exclusion; crowding-in transfer |
| JEL: | I32 Z13 O12 D85 |
| Date: | 2007–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:1947&r=net |