nep-net New Economics Papers
on Network Economics
Issue of 2007‒08‒08
eleven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Stability of Exchange Networks By Gönül Dogan; M.A.L.M. van Assen; Arnout van de Rijt; Vincent Buskens
  2. In search of efficient network structures: The needle in the haystack By Nicolas Carayol (ADIS, BETA); Pascale Roux (ADIS, BETA); Murat Yıldızoğlu (GREThA)
  3. The Evolution of the World Trade Web By Giorgio Fagiolo; Javier Reyes; Stefano Schiavo
  4. Innovation Networks of High Tech SMES: Creation of Knowledge but no Creation of Value By Rob Winters; Erik Stam
  5. International Trade and Financial Integration: A Weighted Network Analysis By Giorgio Fagiolo; Javier Reyes; Stefano Schiavo
  6. Fostering national research networks: The case of Turkish coauthorship patterns in the social sciences By Cedric Gossart; Muge Ozman
  7. Governing the "New Economy": a 3-Phase Historical Model of Cumulative Gales of Creative Destruction of the United Kingdom Internet Service Providers' Market By Michèle Javary
  8. Market Leaders and Industrial Policy By Federico Etro
  9. Complementary Platforms By Jo Reynaerts; Patrick Van Cayseele
  10. Dual licensing in open source software markets By Stefano Comino; Fabio M. Manenti
  11. Bilateral Information Sharing in Oligopoly By Sergio Currarini; Francesco Feri

  1. By: Gönül Dogan (Tilburg University); M.A.L.M. van Assen (Tilburg University); Arnout van de Rijt (Cornell University); Vincent Buskens (Utrecht University)
    Abstract: This paper develops a formal model of exchange network stability that combines expected value theory (Friedkin 1995) with the economic literature on network dynamics. We identify stable networks up to size 8 for varying costs and investigate whether they are Pareto efficient and egalitarian. Only a very small number of networks are stable. Odd cycles and networks consisting of dyads and at most one isolate are the only egalitarian, efficient, and stable networks for a large cost range. We show that some of these results are generalizable to networks of any size and are independent of using expected value theory.
    Keywords: Exchange Networks, Stability, Efficiency, Equity, Social Dilemma
    JEL: D85
    Date: 2007–06
  2. By: Nicolas Carayol (ADIS, BETA); Pascale Roux (ADIS, BETA); Murat Yıldızoğlu (GREThA)
    Abstract: The modelling of networks formation has recently became the object of an increasing interest in economics. One of the important issues raised in this literature is the one of networks efficiency. Nevertheless, for non trivial payoff functions, searching for efficient network structures turns out to be a very difficult analytical problem as well as a huge computational task, even for a relatively small number of agents. In this paper, we explore the possibility of using genetic algorithms (GA) techniques for identifying efficient network structures, because the GA have proved their power as a tool for solving complex optimization problems. The robustness of this method in predicting optimal network structures is tested on two simple stylized models introduced by Jackson and Wolinski (1996), for which the efficient networks are known over the whole state space of parameters values. We also show that this approach can provide new exploratory results for the linear-spatialized connections model of Johnson and Gilles (2000), in which the efficient allocation of bilateral connections is driven by contradictory forces that push either for a centralized structure around a coordinating agent, or for only locally and evenly distributed connections.
    Keywords: Networks; Efficiency; Genetic Algorithms
    JEL: D85 C61
    Date: 2007
  3. By: Giorgio Fagiolo; Javier Reyes; Stefano Schiavo
    Abstract: This paper empirically studies the statistical properties of the world trade web (WTW) and its evolution over time using a weighted network approach. Previous works have characterized the WTW as a binary network, where countries play the role of nodes and a link is in place between any two countries if there exists a sufficiently large amount of trade between them. On the contrary, we exploit the heterogeneity of trade relationships and weight each existing link by some measure of the actual amount of trade carried through that link. Our results indicate that the WTW is a strongly symmetric network, where the majority of trade relationships (and their intensities) are reciprocated. We also find that: (i) the majority of countries hold many weak trade relationships and coexist with a few countries holding less but more intense export relationships; (ii) countries that hold more intense trade relationships preferably trade with poorly-connected countries, but are typically more clustered; (iii) rich countries tend to form more intense trade links and to be more clustered. Furthermore, all structural properties of the WTW display a remarkable stationarity across years. From a methodological point of view, our paper suggests that a weighted network approach is able to provide more precise conclusions than a binary analysis. Many implications that are indeed valid in binary networks are reversed in our weighted analysis. Finally, we show that all our main results are robust to alternative weighting procedures.
    Keywords: Networks; World trade web; international trade; weighted network analysis; integration; trade openness; globalization
    Date: 2007–07–16
  4. By: Rob Winters (Netherlands Ministry of the Interior and Kingdom Relations); Erik Stam (University of Cambridge, Utrecht University; Max Planck Institute of Economics)
    Abstract: This paper analyses the effects of innovation networks on product and process innovation and sales growth of high technology SMEs. Innovation net- works are positively related to both product and process innovation, i.e. knowledge creation. One exception is the negative effect of innovation networks with suppliers on product innovation. Older SMEs are more product innovative than young SMEs. The positive relation between firm size and (process) innovation, disappears when networks are introduced into the analyses. The general conclusion is that vertical innovation networks remove the effect of firm size on process innovation. In other words, high-tech SMEs can ‘borrow’ size if they co-operate with customers, but especially with suppliers for process innovation. So smallness is not necessarily a disadvantage for innovation, as long as firms cooperate with other organisations. Innovation and networks do not seem to effect value creation, measured as sales growth.
    Keywords: innovation, innovation networks, high tech SMEs, firm growth
    JEL: D21 D83 D85 L25 O31 O32
    Date: 2007–07–31
  5. By: Giorgio Fagiolo; Javier Reyes; Stefano Schiavo
    Abstract: In this paper we compare the patterns of trade and financial integration by exploit- ing network analysis. Our results show that, by combining binary and weighted network analysis, it is possible to deliver more precise and thorough insights on the topological structure and properties of the international trade and financial net- works (ITN and IFN). We find that the ITN is more densely connected than the IFN and that the degree of international financial integration varies with asset type. Our results also indicate that richer countries are better linked and form groups of tightly interconnected nodes. This can be seen as a sign of the persistent relevance of local relations. Yet, the growing importance of global links is testified by the disassortative feature of both the ITN and the IFN: poorly connected nodes tend to connect to central ones and use them as hubs to access the rest of the network.
    Keywords: International Trade, International Financial Flows, Globalization, Complex Weighted Networks, Dynamics.
    Date: 2007–07–16
  6. By: Cedric Gossart (Cankaya University, Department of Economics); Muge Ozman (Science and Technology Policies Research Centre, METU)
    Abstract: We analyse the coauthorship networks of researchers affiliated at universities in Turkey by using two databases: the international SSCI database and the Turkish ULAKBIM database. We find that coauthorship networks are composed largely of isolated groups, permitting little knowledge diffusion. Moreover, there seems to be two disparate populations of researchers. While some scholars publish mostly in the international journals, others target the national audience, and there is very little intersection between the two populations. The same observation is valid for universities, among which there is very little collaboration. Our results point out that while Turkish social sciences and humanities publications have been growing impressively in the last decade, domestic networks to ensure the dissemination of knowledge and of research output are very weak and should be supported by domestic policies.
    Keywords: Research collaboration, coauthorship, networks, research policy.
    Date: 2007–07
  7. By: Michèle Javary (CENTRIM, University of Brighton)
    Abstract: This article documents the industrial dynamics and the innovation processes inherent in the fast emerging dial-up Internet access segment of the new telecommunication sector in the United Kingdom for the period between 1992 - 2002. It shows that evolving market structures and related products and service innovation in the wholesale and retail branches of the UK Internet Service Providers' market have to be understood in the context of: a) an entrepreneurial thrust that seizes the advantage of a glut of finance accumulated from the privatization of the utilities; b) the evolution of the relationship between the UK voice and data transfer markets after the privatization of British Telecommunications and the strategic development of its 'intelligent network'; c) the related network technologies and services available for deployment at the start of the implementation of the Internet as a mass infrastructure; d) BT's quasi-monopoly in call origination and finally e) the wider evolutionary industrial dynamics, i.e. a cumulative process of conjectures and feedback loops of market power, strategic management and transformation in corporate and institutional governance following the market's expansion and the transition from metered to unmetered dial up Internet access.
    Keywords: innovation and industrial dynamics, dial-up Internet, United Kingdom
    JEL: L96 O31
    Date: 2007–06–01
  8. By: Federico Etro (Department of Economics, University of Milan-Bicocca)
    Abstract: This article provides an overview of recent progress in the theory of market structure, of the role of market leaders and the scope of industrial policy, presents new results through simple examples of quantity competition, price competition and competition for the market and develops new applications to the theory of competition in presence of network externalities and learning by doing, of strategic debt financing in the optimal financial structure, of bundling as a strategic device, of vertical restraints through interbrand competition, of price discrimination and to the theory of innovation. Finally, it draws policy implications for antitrust issues with particular reference to the approach to abuse of dominance and to the protection of IPRs to promote innovation.
    Keywords: Leadership, Free, Competition Policy, Financial Structure, Bundling, Innovation, Strategic Trade Policy
    JEL: L1
    Date: 2006–11
  9. By: Jo Reynaerts; Patrick Van Cayseele
    Abstract: We introduce an analytical framework close to the canonical model of platform competition investigated by Rochet and Tirole (2006) to study pricing decisions in two-sided markets when two or more platforms are needed simultaneously for the successful completion of a transaction. The model developed is a natural extension of the Cournot-Ellet theory of complementary monopoly featuring clear cut asymmetric single- and multihoming patterns across the market. The results indicate that the so-called anticommons problem generalizes to two-sided markets because individual platforms do not take into account the negative pricing externality they exert on the other platforms. As a result, mergers between such platforms may be welfare enhancing, but involve redistribution of surplus from one side of the market to the other. Moreover, the limit of an atomistic allocation of property rights however is not monopoly pricing, indicating that there also exist differences with the received theory of complementarity.
    Keywords: Two-Sided Markets, Complements, The Anticommons Problem
    JEL: D43 D62 K11 L13 L4 L5
    Date: 2007
  10. By: Stefano Comino; Fabio M. Manenti
    Abstract: Dual licensing has proved to be a sustainable business model for various commercial software vendors employing open source strategies. In this paper we study the main characteristics of dual licensing and under which conditions it represents a profitable commercial strategy. We show that dual licensing is a form of versioning, whereby the software vendor uses the open source licensing terms in order to induce commercial customers to select the proprietary version of the software. Furthermore, we show that the software vendor prefers dual licensing to a fully proprietary strategy when the customers are very sensitive to the reciprocal terms of the open source license.
    Keywords: Open source software, dual licensing, copyright, versioning, forking.
    JEL: L11 L17 L86 D45
    Date: 2007
  11. By: Sergio Currarini; Francesco Feri
    Abstract: We study the problem of information sharing in oligopoly, when sharing decisions are taken before the realization of private signals. Using the general model developed by Raith (1996), we show that if firms are allowed to make bilateral exclusive sharing agreements, then some degree of information sharing is consistent with equilibrium, and is a constant feature of equilibrium when the number of firms is not too small. Our result is to be contrasted with the traditional conclusion that no information is shared in common values situations with strategic substitutes - such as Cournot competition with demand shocks - when firms can only make industry-wide sharing contracts (e.g., a trade association).
    Keywords: Information sharing, oligopoly, networks, Bayesian equilibrium
    JEL: D43 D82 D85 L13
    Date: 2007–07

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