nep-net New Economics Papers
on Network Economics
Issue of 2007‒04‒21
eight papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Evolution of Roommate Networks: A Comment on Jackson and Watts JET (2002) By Bettina Klaus; Flip Klijn; Markus Walzl
  2. Institutions, Networks and Entrepreneurship Development in Russia: An Exploration By Ruta Aidis; Saul Estrin
  3. The pricing dynamics of utilities with underdeveloped networks By Kessides, Ioannis N.; Chisari, Omar O.
  4. Tying in Two-Sided Markets and the Honor All Cards Rule By ROCHET, Jean-Charles; TIROLE, Jean
  5. Exclusionary Pricing and Rebates When Scale Matters By Karlinger, Liliane; Motta, Massimo
  6. Tying and Freebies in Two-Sided Markets By AMELIO, Andrea; JULLIEN, Bruno
  8. Family, Partnerships, and Network: Reflections on the Strategies of the Salvadori Firm of Trento (17th-18th Centuries) By Cinzia Lorandini

  1. By: Bettina Klaus; Flip Klijn; Markus Walzl
    Abstract: We extend Jackson and Watts's (2002) result on the coincidence of S-stochastically stable and core stable networks from marriage problems to roommate problems. In particular, we show that the existence of a side-optimal core stable network, on which the proof of Jackson and Watts (2002) hinges, is not crucial for their result.
    Keywords: core, networks, roommate problems, stochastic stability
    JEL: C62 C78
    Date: 2007–04–13
  2. By: Ruta Aidis; Saul Estrin
    Abstract: In this paper we explore the ways in which institutions and networks influence entrepreneurial development in Russia. By utilizing new Global Entrepreneurship Monitor (GEM) data collected in 2001, we investigate the effects of the weak institutional environment in Russia in terms of three dimensions: on the rate of productive entrepreneurial activity measured in terms of start-ups and existing business owners; on the characteristics of business owners; and on business financing. In addition, the analysis explores the effectiveness of Russia’s informal networks for circumventing the weak institutional environment for business development. Our results indicate that Russia’s business owners share many of the same characteristics as business owners in advanced western countries, though education is not associated with entrepreneurial activity. However, the main differences are in the sources of financing and the fact that relatively few individuals engage in productive entrepreneurial activity. Our results support the notion of the limited effectiveness of Russia’s networks for supporting entrepreneurial activity in its weak institutional environment.
    Keywords: Entrepreneurship, Institutions, Networks, Russia
    JEL: L14 M13 P36
    Date: 2006–06–01
  3. By: Kessides, Ioannis N.; Chisari, Omar O.
    Abstract: This paper uses an analytically tractable intertemporal framework for analyzing the dynamic pricing of a utility with an underdeveloped network (a typical case in most developing countries) facing a competitive fringe, short-run network adjustment costs, theft of service, and the threat of a retaliatory regulatory review that is increasing with the price it charges. This simple dynamic optimization model yields a number of powerful policy insights and conclusions. Under a variety of plausible assumptions (in the context of developing countries) the utility will find its long-run profits enhanced if it exercises restraint in the early stages of network development by holding price below the limit defined by the unit costs of the fringe. The utility ' s optimal price gradually converges toward the limit price as its network expands. Moreover, when the utility is threatened with retaliatory regulatory intervention, it will generally have incentives to restrain its pricing behavior. These findings have important implications for the design of post-privatization regulatory governance in developing countries.
    Keywords: Ec onomic Theory & Research,Markets and Market Access,Urban Water Supply and Sanitation,Infrastructure Regulation,Access to Markets
    Date: 2007–04–01
  4. By: ROCHET, Jean-Charles; TIROLE, Jean
    Date: 2006–02
  5. By: Karlinger, Liliane; Motta, Massimo
    Abstract: We consider an incumbent firm and a more efficient entrant, both offering a network good to several asymmetric buyers. The incumbent disposes of an installed base, while the entrant has a network of size zero at the outset, and needs to attract a critical mass of buyers to operate. We analyze different price schemes (uniform pricing, implicit price discrimination - or rebates, explicit price discrimination) and show that the schemes which - for given market structure - induce a higher level of welfare are also those under which the incumbent is more likely to exclude the rival.
    Keywords: abuse of dominance; exclusionary practices; network industry; price discrimination; rebates
    JEL: L11 L14 L42
    Date: 2007–04
  6. By: AMELIO, Andrea; JULLIEN, Bruno
    Date: 2007–03
  7. By: Friederike Mengel (Universidad de Alicante); Veronika Grimm (Universidad de Alicante)
    Abstract: We experimentally investigate the effect of imperfect separation of groups on group selection and cooperation in a standard prisoner¿s dilemma environment. Subjects can repeatedly choose between two groups, where in one of them an institutionalized norm fosters cooperation. The degree of separation of the two groups is varied between treatments. We find that both, the share of participants that choose into the group where the norm is implemented and the share of participants that cooperate, rise monotonously with the degree of group separation. Furthermore with higher group separation significantly more subjects support the enforcement of the norm.
    Keywords: Experiments, Cooperation, Group Selection, Social Norms, Population Viscosity.
    JEL: L13 L23
    Date: 2007–04
  8. By: Cinzia Lorandini
    Abstract: This paper analyzes entrepreneurial behavior in the Ancient Regime and examines a particularly long-lived family business, the “Valentino e Isidoro Salvadori” firm, which operated in Trento for more than two centuries. The firm survived several generational transitions, it was engaged in many activities and partnerships, and it entered into an extensive network of Italian and Central-European operators. The Salvadori started as local shopkeepers and became merchant-entrepreneurs of international renown, involved at the same time in manufacturing, commercial, and financial activities, thus providing extensive material for a case study. The purpose of this paper is to investigate the strategies and the factors influencing the Salvadori’s entrepreneurial behavior in the seventeenth- and eighteenth centuries, taking into account the broader socio-economic, institutional, and cultural framework. After a long-period overview of the strategies adopted by the family, who started managing a diversified business and ended up specializing in the silk sector, a detailed analysis is devoted to the role of the family, the partnerships, and the network, paying particular attention to their impact on transaction costs, as well as on agency costs.
    Date: 2007

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