nep-net New Economics Papers
on Network Economics
Issue of 2009‒02‒22
three papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Regulatory federalism in network industries By Francesc Trillas
  2. Compatibility with Firm Dominance By María Fernanda Viecens
  3. Social Interactions and Spillovers: Incentives,Segregation and Topology By Antonio Cabrales; Antoni Calvó-Armengol; Yves Zenou

  1. By: Francesc Trillas (Universitat de Barcelona & IEB)
    Abstract: This article starts by surveying the literature on economic federalism and relating it to network industries. Some new developments (which focus on the role of inter-jurisdictional externalities and multiple objectives) are then added and used to analyze regulatory arrangements in telecommunications and energy in the EU and the US. Although central or federal policy making is more focused and specialized and makes it difficult for more interest groups to organize, it is not clear that under all conditions central powers will not be associated with underinvestment. When technology makes the introduction of competition in some segments possible, the possibilities for organizing the institutional architecture of regulation expand.
    Keywords: Regulation, federalism, network industries.
    JEL: L50 L94 L96 L97 K23 H77
    Date: 2008
  2. By: María Fernanda Viecens
    Abstract: This paper analyzes the effect of firm dominance on the incentives to become compatible and how compatibility decisions affect investment incentives. We will consider compatibility in two dimensions: compatibility of the complementary good and inter-network compatibility. We show that if products are substitutes, compatibility tends to be welfare decreasing with the potential negative consequences of increasing compatibility being more likely when asymmetries are strong. We also find that in many instances the dominant firm’s interests regarding compatibility are in line with those of users, and are opposite to those of the weak firm, which will always demand more compatibility to be enforced. Finally we show that compatibility may harm innovation, particularly for the dominant firm.
    Date: 2009–02
  3. By: Antonio Cabrales; Antoni Calvó-Armengol; Yves Zenou
    Abstract: The aim of this paper is to understand the interactions between productive effort and the creation of synergies that are the sources of technological collaboration agreements, agglomeration, and social interactions. We model this interaction in a way that allows us to characterize how agents devote resources to both activities. This permits a full-edged equilibrium/welfare analysis of network formation with endogenous productive efforts, to derive unambiguous comparative statics results and to analyze community sorting by individual traits. In spite of its parsimony the model retains enough richness to replicate a broad range of empirical regularities displayed by social and economic networks, and to relate them to individual and social welfare. Key words: random network, spillovers, network formation, network topology.
    Date: 2009–02

This nep-net issue is ©2009 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.