nep-net New Economics Papers
on Network Economics
Issue of 2008‒06‒21
ten papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Tariff-Mediated Network Externalities: Is Regulatory Intervention Any Good? By Hoernig, Steffen
  2. Platform Intermediation in a Market for Differentiated Products By Andrea Galeotti; José Luis Moraga-González
  3. Information Trading in Social Networks By Karavaev, Andrei
  4. Leadership in online knowledge networks : challenges and coping strategies in a network of practice By Agterberg, M.; Huysman, M.; Hooff, B. van den
  5. Networks for change: How networks influence organizational change By Manuel Portugal Ferreira
  6. Keeping the wheels turning : multi-level dynamics in organizing networks of practice By Agterberg, M.; Hooff, B. van den; Huysman, M.
  7. No 'Third Way' for Economic Organizations? Networks and Quasi-Markets in Broadcasting By Simon Deakin; Ana Lourenço; Stephen Pratten
  8. Timing of product introduction in network economies under heterogeneous demand By Christian Dahl Winther
  9. A Value for Directed Communication Situations By Enrique González-Arangüena; Conrado Manuel; Daniel Gomez; René van den Brink
  10. Pricing, Capacity and Long-run Cost Functions for First-best and Second-best Network Problems By Erik T. Verhoef; Andrew Koh; Simon Shepherd

  1. By: Hoernig, Steffen
    Abstract: Mobile phone networks' practice of charging higher prices for off-net than for on-net calls has been pinpointed as the source of two competition problems: underprovision of calls and permanent disadvantages for small networks. We consider these allegations and four different remedies: limiting on/off-net differentials or off-net margins, lower termination fees, and asymmetric termination fees. In all cases a trade-off has to be made between efficiency and networks' profits on the one hand, and consumer surplus on the other. Indeed, the total welfare effects of regulating on/off-net differentials are ambiguous and depend on demand characteristics.
    Keywords: Network competition; on/off-net differentials; retail price controls; termination fees
    JEL: L13 L51 L96
    Date: 2008–06
  2. By: Andrea Galeotti (University of Essex, U.K.); José Luis Moraga-González (University of Groningen, Groningen, the Netherlands, and CESifo)
    Abstract: We study a two-sided market where a platform attracts firms selling differentiated products and buyers interested in those products. In the unique subgame perfect equilibrium of the game, the platform fully internalizes the network externalities present in the market and firms and consumers all participate in the platform with probability one. The monopolist intermediary extracts all the economic rents generated in the market, except when firms and consumers can trade outside the platform, in which case consumers retain part of the economic rents. The market allocation is constraint efficient in the sense that the monopoly platform does not introduce distortions over and above those arising from the market power of the differentiated product sellers. An increase in the number of retailers increases the amount of variety in the platform but at the same time increases competition. As a result, the platform lowers the firm fees and raises the consumer charges. In contrast, an increase in the extent of product differentiation raises the value of the platform for the consumers but weakens competition. In this case, the platform raises both the charge to the consumers and the fee for the firms.
    Keywords: Two-sided markets; network externalities; intermediation; advertising
    JEL: L12 L13 D42 D43
    Date: 2008–02–25
  3. By: Karavaev, Andrei
    Abstract: This paper considers information trading in fixed networks of economic agents who can only observe and trade with other agents with whom they are directly connected. We study the nature of price competition for information in this environment. The linear network, when the agents are located at the integer points of the real line, is a specific example I completely characterize. For the linear network there always exists a stationary equilibrium, where the strategies do not depend on time. I show that there is an equilibrium where any agent has a nonzero probability of staying uninformed forever. Under certain initial conditions this equilibrium is a limit of equilibria of finite-horizon games. The role of a transversality condition is emphasized, namely that the price in the transaction should not exceed the expected utility of all the agents who get the information due to the transaction. I show that the price offered does not converge to zero with time.
    Keywords: Networks; information trading; information diffusion
    JEL: Z13 D83 O33 D85
    Date: 2008–03–15
  4. By: Agterberg, M. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Huysman, M.; Hooff, B. van den
    Abstract: In this paper we explore the challenges and coping strategies for leading online intraorganizational Networks of Practice (NOPs). The research indicates that coordinating distributed knowledge in NOPs poses a leadership challenge that is not yet addressed in the literature on knowledge management in general and is unique when comparing intraorganizational NOPs to research on leadership in other types of online knowledge networks. This challenge entails creating and maintaining a balance between the interests of the formal organization and the interests of the informal network, and shows that coordinating informal knowledge sharing in a formal context involves a management dilemma thereby contributing to theory on coordinating distributed knowledge
    Keywords: distributed knowledge; knowledge coordination; leadership, management dilemma; networks of practice
    Date: 2008
  5. By: Manuel Portugal Ferreira (Instituto Politécnico de Leiria)
    Abstract: This paper contributes to the literature on organizational change by examining organizations as social entities embedded in inter-organizational networks. In contrast to extant research that focuses on macro environment and internal factors to explain organizational change we put forth the social network surrounding the firm as a major driver of any change process. In specific we examine organization change as driven by the organizations? positions and relations in an interorganizational network. Our conceptual framework demonstrates that inter-organizational networks are important mid-level environmental factors that complement the macro-environment and internal organizational factors for the study of organizational changes. We conclude with a discussion on normative implications for organizations and avenues for future research.
    Keywords: organizational change, social networks
    JEL: M0 M1
    Date: 2008–06–09
  6. By: Agterberg, M. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Hooff, B. van den; Huysman, M.
    Abstract: This paper addresses organizing dynamics of intra-firm ‘networks of practice’ (NOPs). It unravels different dimensions that play a role in knowledge sharing within NOPs: (1) practice dimension; (2) social dimension; and (3) organizational dimension. Based on a unique interpretive case study, we ‘unpack’ each dimension and consider them as dynamic based on either positive or negative forces that influence knowledge sharing in NOPs. By introducing the metaphor of a cogwheel, we argue that maintaining continuation of a NOP involves the dynamics of three levels of embeddedness (1) embeddedness of the NOP in local practices; (2) social embeddedness of the network; and (3) organizational embeddedness of the network. This integrative framework of multi-level dynamics helps to further our understanding regarding the success and failures of organizing NOPs.
    Keywords: Distributed Organizations; Knowledge Management; Networks of Practice, Distributed Organizations; Knowledge Management; Networks of Practice;Organization; Practice-based learning; Social embeddedness
    Date: 2008
  7. By: Simon Deakin; Ana Lourenço; Stephen Pratten
    Abstract: We present two linked, longitudinal case studies of the use of quasi markets in UK broadcasting over the past decade: one looks at the regulated outsourcing of programme making to independent producers, the other at the development of an internal market system within the BBC. New network forms are shown to have arisen from the interaction of legal regulation, contracts, and property rights. However, these organizational forms are also seen to be associated with increased transaction costs and with signs of deterioration in programme quality and innovation. We suggest that for such networks to be a viable 'third way' between markets and hierarchy, closer attention needs to be given to the issue of institutional design.
    Keywords: networks, quasi markets, television production
    JEL: K23 L14 L24 L82
    Date: 2008–03
  8. By: Christian Dahl Winther (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: This paper studies the introduction of a new and incompatible technology in a spatial market with network externalities. In competition with an established network, the entrant chooses how long to do research and a level of product differentiation, which determine the adoption patterns of consumers as a function of time and the scope for private rents. First, the paper derives a function showing the intertemporal evolution in market shares as a function of the choices made by the newcomer. Second, under incompatibility of standards each level of research is associated with both a minimum and a maximum level of product differentiation that should be chosen by the sponsor of the new technology in equilibrium. Third, the formal relationship between these variables are derived under compatibility. Fourth, the entering firm’s problem is solved by numerical methods to gain insight into the optimal linkage between research time and product design.
    Keywords: Product introduction, network externalities, product differentiation.
    JEL: D62 O33 M30
    Date: 2007–11–20
  9. By: Enrique González-Arangüena (Universidad Complutense de Madrid); Conrado Manuel (Universidad Complutense de Madrid); Daniel Gomez (Universidad Complutense de Madrid); René van den Brink (VU University Rotterdam)
    Abstract: In this paper we introduce an extension of the model of restricted communication in cooperative games as introduced in Myerson (1977) by allowing communication links to be directed and the worth of a coalition to depend on the order in which the players enter the coalition. Therefore, we model the communication network by a directed graph and the cooperative game by a generalized characteristic function as introduced in Nowak and Radzik (1994). We generalize the Myerson value for undirected (or standard) communication situations to the context of directed communication and provide two axiomatizations of this digraph Myerson value using component efficiency and either fairness or the balanced contributions property.
    Keywords: Myerson value; Digraph communication situations
    JEL: C71
    Date: 2008–01–17
  10. By: Erik T. Verhoef (VU University Amsterdam); Andrew Koh (University of Leeds); Simon Shepherd (University of Leeds)
    Abstract: This paper considers the use of ‘long-run cost functions’ for congested networks in solving second-best network problems, in which capacity and tolls are instruments. We derive analytical results both for general cost and demand functions and for specific functional forms, namely Bureau of Public Roads cost functions and constant-elasticity demand functions. The latter are also used in a numerical simulation model. We consider second-best cases where only a subset of links in a network is subject to tolling and/or capacity choice, and cases with and without a self-financing constraint imposed. We will demonstrate that, under certain assumptions, second-best long-run cost (or actually: generalized price) functions can be derived for most of the cases of interest, which can be used in an applied network model as a substitute for the conventional short-run user cost functions. Doing so reduces the dimensionality of the problem and should therefore be helpful in speeding up procedures for finding second-best optima.
    Keywords: Traffic congestion; Road pricing; Road capacity choice; Second-best; Networks
    JEL: R41 R48 D62
    Date: 2008–06–05

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