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on Network Economics |
| By: | João Leão (MIT - Department of Economics, ISCTE - Department of Economics and UNIDE-ERC); Vasco Santos (FE-UNL and INOVA) |
| Abstract: | New horizontally-differentiated goods involving product-specific network effects are quite prevalent. Consumers’ preferences for each of these new goods often are initially unknown. Later, as sales data begin to accumulate, agents learn market-wide preferences which thus become common knowledge. We call network goods’ markets showing these two features “new network markets.” For such markets, we pinpoint the factors determining whether the market-wide preferred firm reinforces its lead as time elapses, both when market-wide preferences are time invariant and when they may change. The latter case allows for the study of markets subject to consumer fads (unanticipated and fleeting consumers’ preference for one product). We show that in new network markets subject to such fads, the firm that benefits from a fad in a mature phase of the industry may be better off than one that benefits from an equal-strength fad at an earlier stage despite the presence of network effects. Moreover, we show that new network markets are more prone to increased sales dominance of the leading firm than are regular network markets. Finally, we characterize the social-welfare maximizing allocation of consumers to networks and use it to evaluate from a social-welfare viewpoint the market outcomes of both types of new network goods as well as regular network goods. |
| Keywords: | Network Effects, Learning, Horizontal Differentiation, Vertical Differentiation |
| JEL: | L14 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:isc:wpaper:ercwp2308&r=net |
| By: | Ballester, Coralio; Calvó-Armengol, Antoni; Zenou, Yves |
| Abstract: | Delinquents are embedded in a network of relationships. Social ties among delinquents are modelled by means of a graph where delinquents compete for a booty and benefit from local interactions with their neighbors. Each delinquent decides in a non-cooperative way how much delinquency effort he will exert. Using the network model developed by Ballester et al. (2006), we characterize the Nash equilibrium and derive an optimal enforcement policy, called the key-player policy, which targets the delinquent who, once removed, leads to the highest aggregate delinquency reduction. We then extend our characterization of optimal single player network removal for delinquency reduction, the key player, to optimal group removal, the key group. We also characterize and derive a policy that targets links rather than players. Finally, we endogenize the network connecting delinquents by allowing players to join the labor market instead of committing delinquent offenses. The key-player policy turns out to be much more complex since it depends on wages and on the structure of the network. |
| Keywords: | Crime policies; Delinquency decision; Key group; NP-hard problem; Social networks |
| JEL: | A14 C72 K42 L14 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7293&r=net |
| By: | Rodrigo Harrison (Instituto de Economía. Pontificia Universidad Católica de Chile.); Gonzalo Hernández; Roberto Muñoz. |
| Abstract: | This paper studies the welfare implications of equilibrium behavior in a market characterized by competition between two interconnected telecommunication ?rms, subject to constraints: the customers belong to a social network. It also shows that social networks matter because equilibrium prices and welfare critically depend on how people are socially related. Next, the model is used to study e¤ectiveness of alternative regulatory schemes. The standard regulated environement, in which the authority de?nes interconnection ac cess charges as being equal to marginal costs and ?nal prices are left to the market, is considered as a benchmark . Then, we focus on the performance of two di¤erent regulatory interventions. First, access prices are set below marginal costs to foster competition. Second, switching costs are reduced to intensify competition. The results show that the second strategy is more efective to obtain equilibrium prices closer to Ramsey?s level. |
| Keywords: | Access charges, social networks, random regular graphs. |
| JEL: | C70 D43 D60 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:350&r=net |