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on Network Economics |
| By: | Wilko Bolt; Sujit Chakravorti |
| Abstract: | In this article, we survey the recent theoretical literature on payment cards and study their implications for public policy. Payment card networks have faced regulatory scrutiny in several countries regarding the setting of various fees including interchange fees fees paid by the merchant's financial institution to the cardholder's financial institution. In addition, other common payment practices such as no-surcharge rules have also been challenged in several jurisdictions. Unlike other types of markets, card payment services are network goods where two distinct end-users (i.e. consumers and merchants) must participate for the good to be consumed. |
| Keywords: | retail financial services; payment card networks; pricing; competition |
| JEL: | L11 G21 D53 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:193&r=net |
| By: | Mohamed Belhaj (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579, ECM - Ecole Centrale de Marseille - Ecole Centrale de Marseille); Frédéric Deroïan (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579) |
| Abstract: | This article explores individual incentives to produce information on communication networks. In our setting, efforts are strategic complements along communication paths with possible decay. We analyze Nash equilibria on the line network. We give conditions under which more central agents provide more efforts for general payofffunctions, and we fully characterize equilibria under geometric decay. |
| Keywords: | Communication Network, Endogenous Efforts, Strategic Complements |
| Date: | 2009–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00353872_v1&r=net |
| By: | Iyengar, G.; Kets, W.; Sethi, R.; Bowles, S. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper explores the manner in which the structure of a social network constrains the level of inequality that can be sustained among its members. We assume that any distribution of value across the network must be stable with respect to coalitional deviations, and that players can form a deviating coalition only if they constitute a clique in the network. We show that if the network is bipartite, there is a unique stable payoff distribution that is maximally unequal in that it does not Lorenz dominate any other stable distribution. We obtain a complete ordering of the class of bipartite networks and show that those with larger maximum independent sets can sustain greater levels of inequality. The intuition behind this result is that networks with larger maximum independent sets are more sparse and hence offer fewer opportunities for coalitional deviations. We also demonstrate that standard centrality measures do not consistently predict inequality. We extend our framework by allowing a group of players to deviate if they are all within distance k of each other, and show that the ranking of networks by the extent of extremal inequality is not invariant in k. |
| Keywords: | inequality;networks;coalitional deviations;power;centrality. |
| JEL: | C71 D30 D85 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200876&r=net |
| By: | Rudolf Berghammer (Institut f¨ur Informatik Christian-Albrechts-Universität Kiel, Germany); Agnieszka Rusinowska (University of Lyon, Lyon, F-69003, France; CNRS, UMR 5824, GATE, Ecully, F-69130, France; ENS LSH, Lyon, F-69007, France ; Centre Leon Berard, Lyon, F-69003, France; Department of Econometrics and Tinbergen Institute, Free University, The Netherlands); Harrie de Swart (Department of Philosophy, Tilburg University, The Netherlands) |
| Abstract: | We present an application of relation algebra to measure players’ ‘strength’ in a social network with influence between players. In particular, we deal with power, success, and influence of a player as measured by the Hoede-Bakker index, its generalization and modifications, and by the influence indices. We also apply relation algebra to determine followers of a coalition and the kernel of an influence function. This leads to specifications, which can be executed with the help of the BDDbased tool RelView after a simple translation into the tool’s programming language. As an example we consider the present Dutch parliament. |
| Keywords: | RelView, relation algebra, social network, the Hoede-Bakker index, influence index, follower, kernel |
| JEL: | C63 C88 D72 D85 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0902&r=net |
| By: | Michel Grabisch (Centre d'Economie de la Sorbonne); Agnieszka Rusinowska (GATE) |
| Abstract: | In the paper, we study a model of influence in a social network. It is assumed that each player has an inclination to say YES or NO which, due to influence of other players, may be different from the decision of the player. The point of departure here is the concept of the Hoede-Bakker index - the notion which computes the overall decisional "power" of a player in a social network. The main drawback of the Hoede-Bakker index is that it hides the actual role of the influence function, analyzing only the final decision in terms of success and failure. In this paper, we separate the influence part from the group decision part, and focus on the description and analysis of the influence part. We propose among other descriptive tools a definition of a (weighted) influence index of a coalition upon an individual. Moreover, we consider different influence functions representative of commonly encountered situations. Finally, we propose a suitable definition of a modified decisional power. |
| Keywords: | Influence function, influence index, decisional power, social network. |
| JEL: | C7 D7 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:b08066&r=net |
| By: | Wilko Bolt; Sujit Chakravorti |
| Abstract: | We study the ability of banks and merchants to influence the consumer's payment instrument choice. Consumers participate in payment card networks to insure themselves against three types of shocks| income, theft, and their merchant match. Merchants choose which payment instruments to accept based on their production costs and increased profit opportunities. Our key results can be summarized as follows. The structure of prices is determined by the level of the bank's cost to provide payment services including the level of aggregate credit loss, the probability of theft, and the timing of income flows. We also identify equilibria where the bank finds it profitable to offer one or both payment cards. Our model predicts that when merchants are restricted to charging a uniform price for goods that they sell, the bank benefits while consumers and merchants are worse off. Finally, we compare welfare-maximizing price structures to those that result from the bank's profit-maximizing price structure. |
| Keywords: | Retail Financial Services; Network Effects; Social Welfare; Multihoming; Payment Card Networks |
| JEL: | L11 G21 D53 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:197&r=net |