nep-net New Economics Papers
on Network Economics
Issue of 2007‒11‒24
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Diffusion and Competition of Innovative Cardiological Technologies By Thomas Grebel; Tom Wilfer
  2. Competition and Irreversible Investments under Uncertainty By Michele Moretto
  3. The Spread of Free-Riding Behavior in a Social Network By Dunia Lopez Pintado
  4. Evidences on inter-firm R&D partnerships in three high-tech industries By Frédéric Deroïan; Christian Milelli; Zouhaïer M’Chirgui
  5. Software Exclusivity and the Scope of Indirect Network Effects in the U.S. Home Video Game Market By Kenneth S. Corts; Mara Lederman;
  6. Growth, Development and Structural Change of Innovator Networks - The Case of Jena By Uwe Cantner; Holger Graf

  1. By: Thomas Grebel (Friedrich-Schiller-University Jena, Department of Economics); Tom Wilfer (Friedrich-Schiller-University Jena, Department of Economics)
    Abstract: The paper aims to investigate the diffusion process of two competing innovative technologies in the health care sector. Novelties in cardiovascular surgery will serve as an example. Using a rather simple modeling approach for the ecisions of adopters and suppliers we simulate the evolution of a new market and iscuss the effects network externalities and individual learning unfold in different scenarios. Increasing returns to adoption may lead to situations of technological "lock in".
    Keywords: technological change, diffusion processes, competing technologies, adoption decisions, social learning, medical equipment,network externalities.
    JEL: O33 I11 D43
    Date: 2007–11–21
  2. By: Michele Moretto (Università di Padova)
    Abstract: We examine the effect of competition on investment decisions in an industry in which each firm has a completely irreversible investment opportunity and the product market has positive externalities for a small market size and negative externalities for a large market size. In the latter case, which corresponds to the traditional competitive industries, firms invest sequentially as market profitability develops. In the former case, which corresponds to industries in which investment is mutually beneficial, firms invest simultaneously after the market's profitability has developed sufficiently to gain all network benefits and to recover the option value of waiting. These extensions of a real options analysis may help explain rapid and sudden developments such as recent Internet investment, or explain the late take-off phenomenon of prolonged start-up problems, such as the case of fax machine production.
    Keywords: Irreversible Investments, Real Options, Network Effects
    JEL: C61 D81 G31
    Date: 2007–11
  3. By: Dunia Lopez Pintado
    Abstract: We study a model where agents, located in a social network, decide whether to exert effort or not in experimenting with a new technology (or acquiring a new skill, innovating, etc.). We assume that agents have strong incentives to free ride on their neighbors' effort decisions. In the static version of the model efforts are chosen simultaneously. In equilibrium, agents exerting effort are never connected with each other and all other agents are connected with at least one agent exerting effort. We propose a mean-field dynamics in which agents choose in each period the best response to the last period's decisions of their neighbors. We characterize the equilibrium of such a dynamics and show how the pattern of free riders in the network depends on properties of the connectivity distribution.
    Keywords: free ride, independent set, local public good, mean field, social network.
    JEL: C45 C73 D00 D83 D85 H41
    Date: 2007–11–04
  4. By: Frédéric Deroïan; Christian Milelli; Zouhaïer M’Chirgui
    Abstract: This paper describes inter-firm partnerships in three major high-tech industries over the 1985-2005 period. We found that the architecture of the respective networks had evolved toward a 'small world' in the early 1990s. We also found that the number of alliances collapsed in the late 1990s. This result roughly follows the number of patents granted in the respective industries and is correlated to an increase in market concentration, and to some extent to the rising number of mergers and acquisitions.
    Keywords: Innovation, R&D Partnerships, High-Tech Industries, Network Architecture
    JEL: L24 L6 O31
    Date: 2007
  5. By: Kenneth S. Corts (Rotman School of Management, University of Toronto); Mara Lederman (Rotman School of Management, University of Toronto);
    Abstract: This paper investigates the scope of indirect network effects in the home video game industry. We argue that the increasing prevalence of non-exclusive software gives rise to indirect network effects that exist between users of competing and incompatible hardware platforms. This is because software non-exclusivity, like hardware compatibility, allows a software firm to sell to a market broader than a single platform’s installed base, leading to a dependence of any particular platform’s software on all firms’ installed bases. We look for evidence of these market-wide network effects by estimating a model of hardware demand and software supply. Our software supply equation allows the supply of games for a particular platform to depend not only on the installed base of that platform, but also on the installed base of competing platforms. Our results indicate the presence of both a platform-specific network effect and – in recent years – a cross-platform (or generation-wide) network effect. Our finding that the scope of indirect network effects in this industry has widened suggests one reason that this market, which is often cited as a canonical example of one with strong indirect network effects, is no longer dominated by a single platform.
    Keywords: network effects, software exclusivity, video games
    JEL: L11 L15 L82
    Date: 2007–11
  6. By: Uwe Cantner (Friedrich-Schiller-University Jena, Department of Economics. Chair of Economics / Mircroeconomics); Holger Graf (Friedrich-Schiller-University Jena, Department of Economics. Chair of Economics / Mircroeconomics)
    Abstract: We attempt to extend the static analysis of innovator networks by providing case study based insights into the dynamic, developmental or evolutionary pattern of such networks. In the theoretical part, we develop some building blocs that are considered central to a theory of network evolution. Especially, we focus on the growth of innovator networks and their structural change over time, i.e. how new relationships come into existence and existing ties are cut, how new actors join the system, and other actors leave it. The factors shaping these structural properties, can explain how coherence might increase in some periods while it might decrease in others. We exemplify these patterns for the case of the Jena network of innovators during the period 1995-2001.
    Keywords: Innovator network, internal/external relationships, network entry and exit
    JEL: O31 L14 R11
    Date: 2007–11–12

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