nep-net New Economics Papers
on Network Economics
Issue of 2008‒03‒25
eight papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Competing Communications Networks and International Trade By Fukushima, Marcelo; Kikuchi, Toru
  2. Competing for Contacts: Network Competition, Trade Intermediation and Fragmented Duopoly By Dimitra Petropoulou
  3. A Sensitive Flexible-network Approach By Noemí Navarro
  4. Social status in a social structure: noisy signaling in networks By Tom Truyts
  5. Dangerous liaisons: a social network model for the gender wage gap By Maarten Goos; Anna Salomons
  6. Information Costs, Networks and Intermediation in International Trade By Dimitra Petropoulou
  7. Effects of social interactions on scientists' productivity By Carillo, Maria Rosaria; Papagni, Erasmo; Capitanio, Fabian
  8. Conditional Cash Transfers in Education Design Features, Peer and Sibling Effects Evidence from a Randomized Experiment in Colombia By Felipe Barrera-Osorio; Marianne Bertrand; Leigh L. Linden; Francisco Perez-Calle

  1. By: Fukushima, Marcelo; Kikuchi, Toru
    Abstract: This paper investigates the effects of competing communication networks on trade patterns in a Chamberlinian-Ricardian model of monopolistically competitive firms with a continuum of industries that require communication services in production. We conclude that intraindustry trade between different networks is determined by the relative size of networks and technological differences, and that a network will not have an incentive to expand indefi- nitely, despite network externalities.
    JEL: F12
    Date: 2008
  2. By: Dimitra Petropoulou
    Abstract: A two-sided, pair-wise matching model is developed to analyse the strategic interaction between two information intermediaries who compete in commission rates and network size, giving rise to a fragmented duopoly market structure. The model suggests that network competition between information intermediaries has a distinctive market structure, where intermediaries are monopolist service providers to some contacts but duopolists over contacts they share in their network overlap. The intermediaries` inability to price discriminate between the competitive and non-competitive market segments, gives rise to an undercutting game, which has no pure strategy Nash equilibrium. The incentive to randomise commission rates yields a mixed strategy Nash equilibrium. Finally, competition is affected by the technology of network development. The analysis shows that either a monopoly or a fragmented duopoly can prevail in equilibrium, depending on the network-building technology. Under convexity assumptions, both intermediaries invest in a network and compete over common matches, while randomising commission rates. In contrast, linear network development costs can only give rise to a monopolistic outcome.
    Keywords: International Trade, Pairwise Matching, Information Cost, Intermediation, Networks
    JEL: F10 C78 D43 D82 D83 L10
    Date: 2007
  3. By: Noemí Navarro (Department of Economic Theory, Universidad de Málaga)
    Abstract: This paper takes an axiomatic approach for allocating the value of a network when the externalities generated across components are identifiable. Two main approaches exist up to my knowledge: Myerson's (1977) and Jackson's (2005), where the fairness and the flexible network axioms were defined, respectively. I first characterize the Myerson value in terms of the axioms de?ned by Jackson (2005) and then I revisit the flexible network approach by taking into account the distribution of the total value of a network among its components. Two new, and different, allocation rules are defined and characterized in this context, both collapsing into the player-based flexible-network allocation rule in the absence of externalities. I further suggest a flexible network approach from a component-wise point of view, giving it a flavor of stability, and define and characterize a new allocation rule. To conclude, I put all these allocation rules in perspective with respect to the notion of fairness as understood by Myerson (1977).
    Keywords: Myerson value, flexible-network approach, allocation rules, networks
    JEL: C71 C79
    Date: 2008–03
  4. By: Tom Truyts
    Abstract: How do incentives to engage in costly signaling depend on social structure? This paper formalises and extends Thorstein Veblen’s theory of how costly signaling by conspicuous consumption depends on social structure. A noisy signaling game is introduced in which spectators observe signals only imperfectly, and use Bayesian updating to interpret the observed signals. It is shown that this noisy signaling game has (under some weak regularity conditions) a unique plausible Perfect Bayesian Nash equilibrium. Then, a social information network is introduced as a second source of information about a player’s type. Equilibrium signaling depends in the resulting game on the relative quality of the substitute sources of information, which depends again on the social network. For some highly stylised networks, the dependence of equilibrium costly signaling on network characteristics (network size, density and connectedness, the centrality of the consumer in the network) is studied, and a simple dominance result for more arbitrary networks is suggested.
    Date: 2008–03
  5. By: Maarten Goos; Anna Salomons
    Abstract: We combine stylized facts from social network literature with findings from the literature on the gender wage gap in a formal model. This model is based on employers’ use of social networks in the hiring process in order to assess employee productivity. As a result, there is a persistent gender wage gap, with women being underpaid relative to men after controlling for productivity characteristics. Networks exhibit inbreeding biases by productivity and by gender, which in combination with women’s lower network density cause women to be hired less often through referral, as well as receive a lower average referral wage premium. Finally, we use 2001-2006 UK Labour Force Survey data to test the hypotheses implied by our model. We find that networks do indeed account for a significant part of the gender wage gap for newly hired workers.
    Keywords: social networks, gender wage gap, imperfect information
    JEL: J16 J31
    Date: 2008–03
  6. By: Dimitra Petropoulou
    Abstract: This paper presents a pairwise matching model with two-sided information asymmetry to analyse the impact of information costs on endogenous network building and matching by information intermedairies. The framework innovates by examining the role of information costs on incentives for trade intermediation, thereby endogenising the pattern of direct and indirect trade. Intermediation is shown to unambiguously raise expected trade volume and social welfare by expanding the set of matching technologies available to traders. Moreover, convexity in network-building costs is necessary for both direct and indirect trade to arise in equilibrium while the pattern of trade is shown to depend on the level of information costs as well as the relative effectiveness of direct and indirect matching technologies with changing information costs. The model sheds light on the relationship between information frictions and aggregate trade volume, which may be non-monotonic as a result of conflicting effects of information costs on the incentives for direct and indirect trade.
    Keywords: International Trade, Pairwise Matching, Information Cost, Intermediation, Networks
    JEL: F10 C78 D43 D82 D83 L10
    Date: 2007
  7. By: Carillo, Maria Rosaria; Papagni, Erasmo; Capitanio, Fabian
    Abstract: Recent economic research has focused on the economic effects of the social environment. In the economic literature, important phenomena are considered, at least in part, as results of the individual's social environment. There is a similar revival of interest among economists who analyse the world of science and basic research. In this case as well, the environment plays a key role in the agent's behaviour. This paper makes an an empirical analysis of the influence of social interactions on scientists' productivity. In the econometric analysis we investigate the aggregate importance of this phenomenon through the analysis of data on publications in four scientific fields of seven advanced countries. We find that social interactions among researchers have positive effects on a scientist's productivity and that there is a U-shaped relation between the size of a scientific network and individual productivity. We interpret this result as providing evidence for threshold externalities and increasing returns to scale.
    Keywords: Keywords: scientists' productivity; increasing returns in science; social interactions.
    JEL: O41 H41 Z13
    Date: 2007–11
  8. By: Felipe Barrera-Osorio; Marianne Bertrand; Leigh L. Linden; Francisco Perez-Calle
    Abstract: We evaluate multiple variants of a commonly used intervention to boost education in developing countries -- the conditional cash transfer (CCT) -- with a student level randomization that allows us to generate intra-family and peer-network variation. We test three treatments: a basic CCT treatment based on school attendance, a savings treatment that postpones a bulk of the cash transfer due to good attendance to just before children have to reenroll, and a tertiary treatment where some of the transfers are conditional on students' graduation and tertiary enrollment rather than attendance. On average, the combined incentives increase attendance, pass rates, enrollment, graduation rates, and matriculation to tertiary institutions. Changing the timing of the payments does not change attendance rates relative to the basic treatment but does significantly increase enrollment rates at both the secondary and tertiary levels. Incentives for graduation and matriculation are particularly effective, increasing attendance and enrollment at secondary and tertiary levels more than the basic treatment. We find some evidence that the subsidies can cause a reallocation of responsibilities within the household. Siblings (particularly sisters) of treated students work more and attend school less than students in families that received no treatment. We also find that indirect peer influences are relatively strong in attendance decisions with the average magnitude similar to that of the direct effect.
    JEL: I2 I38
    Date: 2008–03

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