nep-net New Economics Papers
on Network Economics
Issue of 2009‒01‒03
eight papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Exploring Network Effects of Point-to-Point Networks: An Investigation of the Spatial Entry Patterns of Southwest Airlines By Jia Yan; Xiaowen Fu; Tae Oum
  2. The Two Faces of Open Innovation: NetworkExternalities and Learning. By Muge Ozman
  3. Regional Versus Individual Aspects of the Digital Divide in Germany By Schleife, Katrin
  4. Network Structure of Japanese Firms Hierarchy and Degree Correlation: Analysis from 800,000 Firms By Konno, Tomohiko
  5. Incentives to Invest and to Give Access to Non-Regulated Next Generation Networks By Duarte Brito; Pedro Pereira; João Vareda
  6. The network topology of CHAPS Sterling By Becher, Christopher; Millard, Stephen; SoramÃÂäki, Kimmo
  7. Trade-imbalances networks and exchange rate adjustments: The paradox of a new Plaza By Andrea Fracasso; Stefano Schiavo
  8. Successful Patterns of Scientific Knowledge Sourcing: Mix and Match By Aschhoff, Birgit; Sofka, Wolfgang

  1. By: Jia Yan; Xiaowen Fu; Tae Oum (School of Economic Sciences, Washington State University)
    Abstract: This paper explores network effects in Point-to-Point airline networks by examining the spatial entry patterns of Southwest airlines during the 1990-2006 period. Estimation results from a spatial probit model reveal clear spatial dependence in profitability across different routes served by the carrier. Detailed investigation suggests two main sources of network effects, namely: (1) airport and regional presence, and (2) substitutability of markets. Findings of the paper suggest also that the network effects embedded in Southwest’s Point-to-Point network have many distinguishing features as compared to those identified in a typical Hub-and-Spoke network. This study brings some fresh insights on airline network effects in general, as well as explaining the pattern of aggressive network expansions of LCCs in particular.
    Keywords: Point-to-Point Networks, spatial entry patterns, Southwest airlines, spatial probit model
    Date: 2008–11
  2. By: Muge Ozman
    Abstract: In this paper I differentiate between two types of benefits of open innova- tion. Network externalities e¤ect happens when open innovation increases the participation of one group of users which increases the value of adoption for another group of users. Learning e¤ect happens when economic actors increase their knowledge through access to external sources of knowledge. I investigate how each effect can be dominant depending on nature of products, by drawing upon previous research in product modularity. In addition I discuss the fac- tors which will strengthen or weaken the e¤ects of each dimension. The main variables which influence learning are, tacitness of knowledge, technological op- portunities, appropriability of knowledge and turbulence. Network externalities e¤ect can be strengthened by increased user innovation.
    Date: 2008
  3. By: Schleife, Katrin
    Abstract: This paper analyzes the regional dimension of the German digital divide. It studies the determinants of home Internet use in Germany on the level of counties as well as on the level of individuals. Based on two large data sets, the analyses show that population density itself cannot explain regional differences in Internet use rates. The results rather indicate that it is the different composition of individual characteristics between rural and urban populations that accounts for the regional digital divide. At individual level, the findings underline the importance of network effects.
    Keywords: digital divide, Internet use, network effects
    JEL: O18 O33 R20
    Date: 2008
  4. By: Konno, Tomohiko
    Abstract: We found hierarchical structure and negative degree correlation in firms' transaction network. The network consists of 800,000 Japanese firms. We also summarize other features of the network and discuss why studying network structure is important. We also found scale free distribution in undirected network.
    Keywords: Network of firms, scale free network, complex network, hierarchy, degree correlation
    JEL: L16
    Date: 2008
  5. By: Duarte Brito (Universidade Nova de Lisboa); Pedro Pereira (Autoridade da Concorrência); João Vareda (Autoridade da Concorrência)
    Abstract: We analyze the incentives of a telecommunications incumbent to invest and give access to a downstream entrant to a next generation network, NGN. We model the industry as a duopoly, where a vertically integrated incumbent and a downstream entrant, that requires access to the incumbent's network, compete on Hotelling's line. The incumbent can invest in the deployment of a NGN that improves the quality of the retail services. Access to the old network is regulated, but access to the NGN is not. If the innovation is drastic, the incumbent always invests in the NGN, but does not give access to the entrant. If the innovation is non-drastic and if the access price to the old network is low, the incumbent voluntarily gives access to the NGN. If the innovation is non-drastic, there is no monotonic relation between the access price to the old network and the incumbent's incentives to invest. A regulatory moratorium emerges as socially optimal, if the innovation is large but non-drastic. We also analyze the case where both firms can invest in the deployment of a NGN.
    Keywords: Next Generation Networks, Investment, Access, Regulation.
    JEL: L43 L51 L96 L98
    Date: 2008–10
  6. By: Becher, Christopher (Bank of England); Millard, Stephen (Bank of England); SoramÃÂäki, Kimmo (Bank of England)
    Abstract: In this paper, we seek to understand the network topology of large-value interbank payment flows in the United Kingdom so as to understand better the risks associated with the system. We first examined the broad network topology of interbank payments in the United Kingdom. We found that, despite the fact that there are far fewer banks in the United Kingdom than in the United States, the structure of UK interbank payments is similar in certain respects to that of the United States, but that the tiered structure of the UK system implies rather different risk characteristics. We then looked at CHAPS and found that payment flows in CHAPS form a well-connected network whose properties change little day to day. This means that liquidity is able to flow efficiently around the network and that the network is quite resilient to shocks. This finding was backed up by examining the effects of a particular incident on the properties of the CHAPS network. In that particular instance, the effective removal of one bank for much of the day had little impact on the ability of other banks to make payments between one another.
    Keywords: Network topology; CHAPS Sterling; interbank payment flows.
    JEL: D85 G21
    Date: 2008–11–24
  7. By: Andrea Fracasso; Stefano Schiavo
    Abstract: Global imbalances are not new as much as the effort to address them. In the mid 1980s the phenomenon led the most industrialised countries to orchestrate a devaluation of the US dollar so as to reduce the US trade deficit. Some economists have called for a similar "New Plaza" agreement to tackle the present situation. The feasibility of such a plan has not been thoroughly assessed so far. In this paper we apply complex network analysis to characterise the properties of the web of international bilateral trade imbalances. We study its evolution over time and the position of key players within it. We find that the complexity of the network has increased in several dimensions, and this casts doubts on the usefulness of a coordinated solution among industrialised countries only. In addition, we propose new effective exchange rate measures based on bilateral trade imbalances, and study their dynamics in the 1980s and in the 2000s. By distinguishing exchange rate movements against debtor and creditor countries we show that, so far, they have not been consistent with the simultaneous reduction in all trade bilateral imbalances. A paradox therefore emerges: the growing difficulty to orchestrate a plan involving a large number of partners is matched by the inability of so far uncoordinated exchange rate adjustments to close global imbalances.
    Keywords: Plaza agreement, exchange rates, global imbalances, network analysis
    JEL: F31 F33 F42
    Date: 2008
  8. By: Aschhoff, Birgit; Sofka, Wolfgang
    Abstract: Valuable knowledge emerges increasingly outside of firm boundaries, in particular in public research institutions and universities. The question is how firms organize their interactions with universities effectively to acquire knowledge and apply it successfully. Literature has so far largely ignored that firms may combine different types of interactions with universities for optimizing these knowledge sourcing strategies. We argue conceptually that firms need diverse (broad) and highly developed (deep) combinations of various interactions with universities to maximize returns from these linkages. Our empirical investigation rests upon a survey of more than 800 firms in Germany. We find that both the diversity and intensity of interactions with universities propel innovation success. However, broadening the spectrum of interactions is more beneficial with regard to innovation success. In an exploratory step we go beyond breadth and depth of interactions by identifying four distinct patterns of interaction. Our findings show that formal forms of interaction (joint/contract) research provide the best balance between joint knowledge development and value capture.
    Keywords: Technology transfer, industry-science links, open innovation, university knowledge
    JEL: C30 D83 O32
    Date: 2008

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