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on Network Economics |
| By: | Kikuchi, Toru |
| Abstract: | In this article I examine how the network externalities of communications activities and trading opportunities interact to determine the structure of comparative advantage. These interactions are examined by constructing a two-country, three-sector model of trade involving a country-specific communications network sector. The role of the connectivity of network providers, which allows users of a network to communicate with users of another network, is also explored. |
| Keywords: | Network Externalities; Comparative Advantage |
| JEL: | F12 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4613&r=net |
| By: | Gary E Bolton; Claudia Loebbecke; Axel Ockenfels |
| Abstract: | Many Internet markets rely on ‘feedback systems’, essentially social networks of reputation, to facilitate trust and trustworthiness in anonymous transactions. Market competition creates incentives that arguably may enhance or curb the effectiveness of these systems. We investigate how different forms of market competition and social reputation networks interact in a series of laboratory online markets, where sellers face a moral hazard. We find that competition in strangers networks (where market encounters are one-shot) most frequently enhances trust and trustworthiness, and always increases total gains-from-trade. One reason is that information about reputation trumps pricing in the sense that traders usually do not conduct business with someone having a bad reputation not even for a substantial price discount. We also find that a reliable reputation network can largely reduce the advantage of partners networks (where a buyer and a seller can maintain repeated exchange with each other) in promoting trust and trustworthiness if the market is sufficiently competitive. We conclude that, overall, competitive online markets have more effective social reputation networks. |
| Date: | 2007–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:kls:series:0032&r=net |
| By: | Kets, W. (Tilburg University, Center for Economic Research) |
| Abstract: | Networks can have an important effect on economic outcomes. Given the complexity of many of these networks, agents will generally not know their structure. We study the sensitivity of game-theoretical predictions to the specification of players? (common) prior on the network in a setting where players play a fixed game with their neighbors and only have local information on the network structure. We show that two priors are close in a strategic sense if and only if (1) the priors assign similar probabilities to all events that involve a player and his neighbors, and (2) with high probability, a player believes, given his type, that his neighbors? conditional beliefs are similar, and that his neighbors believe, given their type, that. . . the conditional beliefs of their neighbors are similar, for any number of iterations. Also, we show that the common but unrealistic assumptions that the size of the network is common knowledge or that the types of players are independent are far from innocuous: if these assumptions are violated, small probability events can have a large effect on outcomes through players? conditional beliefs. |
| Keywords: | Network games;incomplete information;higher order beliefs;continuity;random networks;population uncertainty. |
| JEL: | C72 D82 L14 Z13 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200746&r=net |
| By: | Uwe Cantner (School of Business and Economics, Friedrich-Schiller University Jena, Germany); Maximilian Goethner (School of Business and Economics, Friedrich-Schiller University Jena, Germany); Andreas Meder (School of Business and Economics, Friedrich-Schiller University Jena, Germany) |
| Abstract: | This paper is concerned with the relationship between innovative success of entrepreneurs and their prior knowledge at the stage of firm formation. We distinguish between different kinds of experience an entrepreneur can possess and find evidence that the innovative success subsequent to firm formation is enhanced by entrepreneur's prior technological knowledge but not by prior market and organizational knowledge. Moreover we find that prior technological knowledge gathered through embeddedness within a research community has an additionally positive influence on post start-up innovative success. This is a first hint towards the importance of collective innovation activities. |
| Keywords: | Entrepreneurship, Networks, Prior knowledge |
| JEL: | L25 O31 Z13 |
| Date: | 2007–08–27 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2007-052&r=net |
| By: | Prufer, J.; Walz, U. (Tilburg University, Center for Economic Research) |
| Abstract: | We analyze competition among clubs in which the status of club members is the crucial added value accruing to fellow club members through social interaction within the club (e.g. in country clubs, academic faculties, or internet communities). In the course of competition for new members, clubs trade off the effect of entry on average status of the club and candidates? monetary payment via an entrance fee. We show that the best candidates join the best clubs but they pay higher entrance fees than some lowerranking candidates. We distinguish among various decision rules and organizational set-ups, including majority voting, unanimity, and meritocracy. We find that, from a second-best welfare perspective, the unanimity rule leads to inefficient exclusion of some candidates, while meritocracy leads to inefficient inclusion. Our main policy implication is that consensus-based clubs, such as many academic faculties in Europe, could improve the well-being of their members if they liberalized their internal decision making processes. |
| Keywords: | club theory;status organizations;design of decision making;collective action |
| JEL: | D71 L22 L31 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200727&r=net |