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on Network Economics |
| By: | Fabio Maria Manenti (University of Padua); Ernesto Somma (University of Bari) |
| Abstract: | We study the strategic choice of compatibility between two initially incompatible network goods in a two-stage game played by an incumbent and an entrant firm. Compatibility may be achieved by means of a converter. We derive a number of results under different assumptions about the nature of the converter (one-way vs two-way), the existence of property rights and the possibility of side payments. With incompatibility, entry deterrence occurs for sufficiently strong network effects. In the case of a two-way converter, which can only be supplied by the incumbent, incompatibility will result in equilibrium unless side payments are allowed and the network externalities are sufficiently low. When both firms can build a one-way converter and there are no property rights on the necessary technical specifications, the unique equilibrium involves full compatibility. Finally, when each firm has property rights on its technical specifications, full incompatibility is observed at the equilibrium with no side payments; when these are allowed the entrant sells access to its network to the incumbent which refuses to do the same and asymmetric one-way compatibility results in equilibrium. The welfare analysis shows that the equilibrium compatibility regime is socially inefficient for most levels of the network effects. |
| Keywords: | network externalities, one-way compatibility, two-way compatibility, entry |
| JEL: | L13 L15 D43 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0068&r=net |
| By: | Jeanne Hagenbach; Frédéric Koessler |
| Abstract: | In this paper, we consider situations in which individuals want to choose an action close to others' actions as well as close to a payoff relevant state of nature with the ideal proximity to the common state varying across the agents. Before this coordination game with heterogeneous preferences is played, a cheap talk communication stage is offered to players who decide to whom they reveal the private information they hold about the state. The strategic information transmission taking place in the communication stage is characterized by a "strategic communication network". We provide a direct link between players' preferences and the strategic communication network emerging at equilibrium, depending on the strength of the coordination motive and the prior information structure. Equilibrium strategic communication networks are characterized in a very tractable way and compared in term of efficiency. In general, a maximal strategic communication network may not exist and communication networks cannot be ordered in the sense of Pareto. However, expected social welfare always increases when the communication network expands. Strategic information transmission can be improved when group or public communication is allowed, and/or when information is certifiable. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-10&r=net |
| By: | Berninghaus, Siegfried K. (Universität Karlsruhe); Ehrhart, Karl-Martin (Universitaet Karlsruhe); Ott, Marion (Universitaet Karlsruhe) |
| Abstract: | A population of players is considered in which each agent can select her neighbors in order to play a 2x2 Hawk-Dove game with each of them. We design our experiment in continuous time where participants may change their Hawk-Dove action and/or their neighborhood at any point in time. We are interested in the resulting formation of networks and the action distributions. Compared with static Nash equilibrium (e.g., Berninghaus and Vogt, 2004, 2006; Bramoulle, Lopez-Pintado, Goyal, and Vega-Redondo, 2004) and social optimum as theoretical benchmark solutions, subjects seem to employ a more complex, forward-looking thinking. We develop an other benchmark solution, called one-step-ahead stability, that combines forward-looking belief formation with rational response and that fits the data much better. |
| Date: | 2008–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:xrs:sfbmaa:08-02&r=net |
| By: | Nuno Bento (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II) |
| Abstract: | This paper aims to investigate the transition to a new energy system based on hydrogen in the European liberalized framework. After analyzing the literature on the hydrogen infrastructure needs in Europe, we estimate the size and scope of the transition challenge. We take the theoretical framework of network economics to analyze early hydrogen infrastructure needs. Therefore, several concepts are applied to hydrogen economics such as demand club effects, scale economies on large infrastructures, scope economies, and positive socio-economical externalities. On the examples of the electricity and natural gas industry formation in Europe, we argue for public intervention in order to create conditions to reach more rapidly the critical size of the network and to prompt network externalities allowing for the market diffusion of and, thus, an effective transition to the new energy system. |
| Keywords: | Network economics ; infrastructure ; hydrogen |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00266304_v1&r=net |
| By: | Syngjoo Choi; Douglas Gale; Shachar Kariv; Thomas Palfrey |
| Date: | 2008–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:122247000000001997&r=net |