nep-net New Economics Papers
on Network Economics
Issue of 2007‒10‒13
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Strategic Basins of Attraction, the Path Dominance Core, and Network Formation Games By Frank Page; Myrna Wooders
  2. Network Multipliers and the Optimality of Indirect Communication By Andrea Galeotti; Sanjeev Goyal
  3. Lock-in and the transition to hydrogen cars. When should governments intervene? By Mads Greaker and Tom-Reiel Heggedal
  4. Innovation Clusters in Technological Systems: A Network Analysis of 15 OECD Countries for the Middle ‘90s By Sandro Montresor; Giuseppe Vittucci Marzetti

  1. By: Frank Page (Indiana University Bloomington); Myrna Wooders (Vanderbilt University)
    Abstract: Given the preferences of players and the rules governing network formation, what networks are likely to emerge and persist? And how do individuals and coalitions evaluate possible consequences of their actions in forming networks? To address these questions we introduce a model of network formation whose primitives consist of a feasible set of networks, player preferences, the rules of network formation, and a dominance relation on feasible networks. The rules of network formation may range from non-cooperative, where players may only act unilaterally, to cooperative, where coalitions of players may act in concert. The dominance relation over feasible networks incorporates not only player preferences and the rules of network formation but also assumptions concerning the degree of farsightedness of players. A specification of the primitives induces an abstract game consisting of (i) a feasible set of networks, and (ii) a path dominance relation defined on the feasible set of networks. Using this induced game we characterize sets of network outcomes that are likely to emerge and persist. Finally, we apply our approach and results to characterize the equilibrium of well known models and their rules of network formation, such as those of Jackson and Wolinsky (1996) and Jackson and van den Nouweland (2005).
    Keywords: basins of attraction, network formation games, stable sets, path dominance core, Nash networks
    JEL: A14 C71 C72
    Date: 2007–10
  2. By: Andrea Galeotti; Sanjeev Goyal
    Abstract: We study the problem of a firm M which wishes to inform a community of individuals about its product. Information travels within the community because of the social interactions between individuals. Our interest is in understanding how the firm can incorporate the network of social interactions in the design of its communication strategy. We study a model of undirected networks and start by showing that social interactions appear in the payoff of the firm in the form of a network multiplier. We establish that the network multiplier is an increasing function of both the mean and the variance in the distribution of connections of the network. This implies in particular that denser and more dispersed degree distributions are better for the firm. We then show that the degree distribution of the neighbour first order dominates the degree distribution of a node at large and so it is always better for a firm to use indirect communication, i.e., viz. picking the neighbour of a node rather than a node itself as the target of communication. Finally, we show that the advantages of indirect communication are increasing with dispersion in the degree distribution.
    Date: 2007–09–28
  3. By: Mads Greaker and Tom-Reiel Heggedal (Statistics Norway)
    Abstract: The density of fuel filling stations influences consumers' utility of private car transport. Thus, to the extent that different modes of private transport require different fuels, there may exist a network externality in the consumption of private transport. We investigate this in a formal model of the market for private transport. In the model there are two competing technologies; today's internal combustion engine based on fossil fuels, and tomorrow's hydrogen car. Due to the network externality there may exist several market equilibriums, of which one is likely to Pareto dominate the other(s). Thus, a lock-in situation is possible. On the other hand, if either the costs of establishing hydrogen filling stations is too high or the hydrogen car technology is still in its infancy, the only equilibrium is the current internal combustion engine equilibrium. Hence, apart from internalizing the environmental externality on gasoline cars, the government has no reasons to intervene before the technology is ripe. And even then, governments should take great care so as not to create a situation of excess momentum.
    Keywords: Lock-in; Path dependency; Hydrogen economy; Climate change policy
    JEL: L11 L15 L62 Q42
    Date: 2007–09
  4. By: Sandro Montresor; Giuseppe Vittucci Marzetti
    Abstract: The paper aims at investigating how innovations cluster in different technological systems (TSs) when their “techno-economic", rather than “territorial" space is considered. Innovation clusters of economic sectors are identified by applying network analysis to the intersectoral R&D flows matrices of 15 OECD countries in the middle '90s. Different clusterization models are first tested in order to detect the way sectors group on the basis of the embodied R&D flows they exchange. Actual clusters are then mapped in the different TSs by looking for intersectoral relationships which can be qualified to constitute “reduced-TSs" (ReTSs). In all the 15 TSs investigated the techno-economic space appears organized in hierarchies, along which its constitutive sectors group into clusters with different density and composition. Once ReTSs are looked for, the 15 TSs display highly heterogeneous structures, but with some interesting similarity on the basis of which different clusters of TSs can be identified in turn.
    Keywords: Innovation clusters; technological systems; R&D expenditure; embodied innovation flows
    JEL: O33 O38 O39
    Date: 2007

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