nep-net New Economics Papers
on Network Economics
Issue of 2008‒07‒05
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Efficiency and the Provision of Open Platforms By Tåg, Joacim
  2. Software Provision and the Impact of Market Integration: A Note By Iwasa, Kazumichi; Kikuchi, Toru
  3. Natural concentration in industrial research collaboration By Bastian Westbrock
  4. Behavorial Effects in Individual Decisions of Network Formation By Harmsen-van Hout Marjolein J.W.; Dellaert Benedict G.C.; Herings P. Jean-Jacques
  5. Open Versus Closed Platforms By Tåg, Joakim
  6. How to Overcome the Digital Divide? The Determinants of Internet Diffusion By Shchetinin, Oleg

  1. By: Tåg, Joacim (Research Institute of Industrial Economics (IFN))
    Abstract: Private firms may not have efficient incentives to allow third-party producers to access their platform or develop extensions for their products. Based on a two-sided market model, I discuss two reasons for why. First, a private firm may not be able to internalize all benefits from cross-group externalities arising with third-party extensions. Second, firms may have strategic incentives to shut out third-parties because it relaxes competition.
    Keywords: Platforms; Two-sided Markets; Open versus Closed
    JEL: D40 L10
    Date: 2008–04–28
  2. By: Iwasa, Kazumichi; Kikuchi, Toru
    Abstract: Both deeper market integration and advances in digital technology have driven particularly large decreases in the costs of inter-market software provision. In this note, we first explain the mechanism of how trade costs in uence the software provision decision of software firms. Then, we investigated the transformation of production/trade patterns given gradually decreasing trade costs for software products.
    JEL: F12
    Date: 2008
  3. By: Bastian Westbrock
    Abstract: Empirical work suggests that the network of research and development alliances is asymmetric, with a small number of firms involved in the majority of partnerships. This paper relates the structure of the collaboration network to a fundamental characteristic of the demand for research output: the benefits of knowledge accumulation create private and social incentives for a concentration of collaborative activities. I theoretically investigate the formation of bilateral collaborative links in two different industry settings, one socially managed, the other oligopolistic. I find that in both cases a concentrated network is the typical equilibrium structure as well as the socially efficient structure.
    Keywords: R&D collaboration, market structure, networks
    JEL: D43 D85 L13
    Date: 2008–06
  4. By: Harmsen-van Hout Marjolein J.W.; Dellaert Benedict G.C.; Herings P. Jean-Jacques (METEOR)
    Abstract: Network formation constitutes an important part of many social and economic processes, but relatively little is known about how individuals make their linking decisions. This article provides an experimental investigation of behavioral effects in individual decisions of network formation. Our findings demonstrate that individuals systematically simplify more complex components of network payoff in their linking decisions. Specifically, they focus on only part of the normative payoff, namely on their own direct payoff and tend to ignore indirect payoff and payoff for others in the network. Additionally, individuals use descriptive behavioral traits of link choice alternatives to guide their choices. They are sensitive to whether an alternative involves link deletion or creation and whether it concerns an isolated or a central node. Furthermore, we find that complexity of one type can moderate individuals’ dealing with a complex feature of another type. These behavioral effects have important implications for researchers and managers working in areas that involve network formation.
    Keywords: Economics (Jel: A)
    Date: 2008
  5. By: Tåg, Joakim (Research Institute of Industrial Economics (IFN))
    Abstract: This paper studies an industry in which firms can choose to provide open or closed platforms. Open platforms, as opposed to closed, are extendable so third-party producers can develop extensions for them. Building on a two-sided market model, I show that firms might prefer to commit to keeping their platforms closed despite the fact that opening the platform is costless and open platforms are more valuable to consumers. The reason is that opening the platform may lead to intensified competition for consumers.
    Keywords: Platforms; Software; Two-sided Markets
    JEL: D40 D42 D43 L10 L12 L13 L14
    Date: 2008–04–12
  6. By: Shchetinin, Oleg
    Abstract: We document the existence and the persistence of the digital divide and investigate the determinants of the Internet diffusion in both developing and developed countries. Our study innovates on the following: i) we use a data set that covers more countries and years than the earlier studies ii) We use the GMM estimator which requires milder assumptions to be consistent than the traditionally used panel data estimators in technology diffusion studies. We find that i) the digital divide is likely to persist over time, ii) the Internet diffusion process is dynamic which makes static estimators inconsistent, iii) Internet adoption starts later but goes faster in developing countries, iv) inflows of the foreign investment and better human capital boost the diffusion of Internet for the developing countries only and v) GDP per capita has a negative impact on Internet diffusion in the developing countries and a positive impact in developed countries. This last finding seems surprising but it is consistent with the conditional convergence hypothesis as well as with the resource curse theory.
    Keywords: internet diffusion; digital divide; panel data; GMM
    JEL: C23 O32 O33
    Date: 2008–06

This nep-net issue is ©2008 by Yi-Nung Yang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.