nep-net New Economics Papers
on Network Economics
Issue of 2008‒02‒09
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Generic Determinacy of Nash Equilibrium in Network Formation Games By Carlos Pimienta
  2. Trust and Reciprocity in 2-node and 3-node Networks By Alessandra Cassar, ac; Mary Rigdon, mr
  3. Me and you and everyone we know: an empirical analysis of local network effects in mobile communications. By Nicoletta Corrocher; Lorenzo Zirulia
  4. An Economic Model of Friendship: Homophily, Minorities and Segregation By Sergio Currarini; Paolo Pin; Matthew O. Jackson
  5. Bilateral Information Sharing in Oligopoly By Sergio Currarini; Francesco Feri
  6. WRC-07: the Technological and Market Pressures for Flexible Spectrum Access By Sims, Martin
  7. Vertical foreclosure, a policy framework By Michiel Bijlsma; Viktoria Kocsis; Victoria Shestalova; Gijsbert Zwart

  1. By: Carlos Pimienta (School of Economics, The University of New South Wales)
    Abstract: This paper shows that the set of probability distributions over networks induced by Nash equilibria of the network formation game proposed by Myerson (1991) is finite for a generic assignment of payoffs to networks. The same result can be extended to several variations of the game found in the literature.
    Keywords: Networks; generic finiteness; Nash Equilibrium
    JEL: C62 C72 D85 L14
    Date: 2007–10
  2. By: Alessandra Cassar, ac; Mary Rigdon, mr
    Abstract: In this paper we focus on the interaction between exogenous network structure and bargaining behavior in a laboratory experiment. Our main question is how competition and cooperation interact in bargaining environments based on networked versions of the investment game. We focus on 3-node networked markets and vary the network structure to model competition upstream (multiple sellers paired with a monopsonistic buyer) and competition downstream (a monopolistic seller paired with multiple buyers). We describe two kinds of models of trust for such networked environments, absolute and relativized models, and use this structure to generate a general hypothesis about these environments: that information crowds in cooperation on the competitive side of the market. The experimental results support this hypothesis.
    Keywords: networks; trust; reciprocity; experiments; investment game
    JEL: L14 D00 C91
    Date: 2008–01–26
  3. By: Nicoletta Corrocher (CESPRI, Bocconi University, Milan, Italy.); Lorenzo Zirulia (University of Bologna, CESPRI, Bocconi University, Milan and The Rimini Centre for Economic Analysis, Rimini, Italy.)
    Abstract: This paper aims at investigating the importance that consumers assign to local network effects (i.e. the extent to which they take into account their contacts’ operators in determining their choices) and at identifying which individual characteristics affect consumers’ preferences in relation to local network effects. Based on a sample of 193 Italian students, we find that consumers are highly heterogeneous with respect to the evaluation of the importance of their friend/family’s operator when choosing their own provider, and that such heterogeneity is associated to specific characteristics related to individual innovativeness and patterns of mobile phone usage. In particular, consumers who are more interested in local network effects are typically sophisticated users, who use intensively voice services and who are early adopters. Interestingly, consumers who pay attention to local network effects end up spending relatively little in proportion to their intensity of use.
    Date: 2008–01
  4. By: Sergio Currarini (Department of Economics, University Of Venice Cà Foscari and School for Advanced Studies in Venice); Paolo Pin (Abdus Salam International Center for Theoretical Physics, Trieste and University of Venice); Matthew O. Jackson (Department of Economics, Stanford University and the Santa Fe Institute.)
    Abstract: We develop a model of friendship formation that sheds light on segregation patterns observed in social and economic networks. Individuals come in different types and have type-dependent benefits from friendships; we examine the properties of a steady-state equilibrium of a matching process of friendship formation. We use the model to understand three empirical patterns of friendship formation: (i) larger groups tend to form more same-type ties and fewer other-type ties than small groups, (ii) larger groups form more ties per capita, and (iii) all groups are biased towards same-type relative to demographics, with the most extreme bias coming from middle-sized groups. We trace each of these empirical observations to specific properties of the theoretical model and highlight the role of choice and chance in generating homophilous behavior. Finally we discuss welfare implications of the model.
    Keywords: Networks, Homophily, Segregation, Friendships, Social Networks, Integration, Diversity, Minorities
    JEL: D85 A14 J15 J16
    Date: 2007
  5. By: Sergio Currarini (Department of Economics, University Of Venice Cà Foscari and School for Advanced Studies in Venice); Francesco Feri (University of Innsbruck)
    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: Networks, Information sharing, oligopoly, networks, Bayesian equilibrium
    JEL: D43 D82 D85 L13
    Date: 2007
  6. By: Sims, Martin
    Abstract: By examining the preparations for the 2007 ITU World Radio Conference (WRC-07) and associated developments this paper identifies practical examples of the market and technological pressures contributing towards a more liberalised approach to spectrum management. It argues that the need to find new spectrum for advanced mobile services (WRC-07 Agenda item 1.4), the growing orthodoxy on spectrum neutrality and the need to accommodate converging technologies are helping to undermine the stricter forms of command and control spectrum management. However, the need for global harmonisation of satellite frequencies and the international variation in rolling out digital terrestrial television place limits on this drive towards greater flexibility.
    Keywords: World Radio Conference; WRC-07; mobile; IMT; IMT-2000; satellite; broadcasting; spectrum liberalisation; mobile TV; DVB-H; WiMAX; technology neutrality; ITU Radio Regulations
    JEL: L96 L82 K2 L51
    Date: 2007
  7. By: Michiel Bijlsma; Viktoria Kocsis; Victoria Shestalova; Gijsbert Zwart
    Abstract: Whenever you phone your mother, switch on the light, or buy health insurance you purchase a service or product from a chain of vertically related industries. Providers of these products or services need access to a telecommunications network, an electricity network or to health care services. In such industries, integration and exclusive contracts between vertically related firms may have important welfare enhancing effects, but can also deny or limit rivals’ access to input or customers, leading to foreclosure. Foreclosure can harm welfare if it reduces competition. This document provides policymakers with a framework to assess the potential for welfare reducing foreclosure of vertical integration and vertical restraints and describes possible remedies. The framework consists of four steps. Each step requires its own detailed analysis. First, market power should exist either upstream or downstream. Second, a theory of foreclosure should be formulated that explains why foreclosure is a profitable equilibrium strategy. Third, the existence and magnitude of potential welfare enhancing effects of the vertical restrains or vertical integration should be assessed. Fourth, suitable policies to address foreclosure should be found.
    Keywords: Vertical foreclosure; Competition policy; Network industries
    JEL: L13 L42 L51
    Date: 2008–01

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