nep-net New Economics Papers
on Network Economics
Issue of 2009‒05‒16
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Indirect Network Effects and Trade Liberalization By Iwasa, Kazumichi; Kikuchi, Toru
  2. Recommendation Networks and the Long Tail of Electronic Commerce By Gal Oestreicher-Singer; Arun Sundararajan
  3. Poverty status and the impact of social networks on smallholder technology adoption in rural Ethiopia By Liverpool, Saweda Onipede. L.; Winter-Nelson, Alex
  4. Competition for Access: Spectrum Rights and Downstream Access in Wireless Telecommunications By Michiel J. Bijlsma; Gijsbert T.J. Zwart
  5. Family Networks and School Enrolment: Evidence from a Randomized Social Experiment By Manuela Angelucci; Giacomo DeGiorgi; Marcos A. Rangel; Imran Rasul
  6. Competition, innovation and intellectual property rights in software markets By Michiel Bijlsma; Paul de Bijl; Viktoria Kocsis

  1. By: Iwasa, Kazumichi; Kikuchi, Toru
    Abstract: Indirect network effects exist when the utility of consumers is increasing in the variety of complementary products available for use with an electronic hardware device. In this paper, we examine how trade liberalization affects production structure in the presence of indirect network effects. For these purposes we construct a simple two-country model of trade with incompatible country-specific hardware technologies. It is shown that, given that both countries' hardware devices remain in the trading equilibrium, both countries gain from trade liberalization. It is also shown that if only one country's hard-ware remains in the integrated market, the other country may lose from trade liberalization.
    Keywords: Indirect network effects; trade liberalization
    JEL: F12
    Date: 2009
  2. By: Gal Oestreicher-Singer (Tel Aviv University); Arun Sundararajan (New York University)
    Abstract: It has been conjectured that the peer-based recommendations associated with electronic commerce lead to a redistribution of demand from popular products or "blockbusters" to less popular or "niche" products, and that electronic markets will therefore be characterized by a "long tail" of demand and revenue. In this paper, we develop a novel method to test this conjecture and we report on results contrasting the demand distributions of books in over 200 distinct categories on Viewing each product as having a unique position in a hyperlinked network of recommendations between product that is analogous to shelf position in traditional commerce, we quantify the extent to which a product is influenced by its recommendation network position by using a variant of Google’s PageRank measure of centrality. We then associate the average level of network influence on each category with the inequality in the distribution of its demand and revenue, quantifying this inequality using the Gini coefficients derived from the category’s Lorenz curve. We establish that categories whose products are influenced more by recommendations have significantly flatter demand distributions, even after controlling for variations in average category demand, the category’s size and measures of price dispersion. Our empirical findings indicate that doubling the average influence of recommendations on a category is associated with an average increase in the relative demand for the least popular 20% of products by about 50%, and a average reduction in the relative demand for the most popular 20% by about 12%. We also show that this effect is enhanced when there is assortative mixing in the recommendation network, and in categories whose products are more evenly influenced by recommendations. The direction of these results persist across time, across both demand and revenue distributions, and across both daily and weekly demand aggregations. Our work offers new ideas for assessing the influence of networks on demand and revenue patterns in electronic commerce, and provides new empirical evidence supporting the impact of visible recommendations on the long tail of electronic commerce.
    Keywords: networks, social networks, electronic commerce, ecommerce, recommender systems, influence, gini coefficient
    JEL: D85 L14 Z13
    Date: 2009–01
  3. By: Liverpool, Saweda Onipede. L.; Winter-Nelson, Alex
    Abstract: Despite recent traces of economic growth, Ethiopia remains one of the poorest countries in the world. Though about 80% of its population is engaged in agriculture, agricultural productivity remains low and extremely vulnerable to climatic conditions. The adoption and use of modern technologies is generally accepted as a potential vehicle out of poverty for many but adoption rates in the country remain low with the nature of the adoption process largely unstudied (Spielman et al, 2007). This paper studies the impact of social networks in the technology adoption process in rural Ethiopia. In particular it tests for the presence of social learning effects. In addition to geographic networks, it considers the role played by other networks with more purposeful interactions such as a householdâs friends. The study explores the differential impacts of social networks by network type, technology and the asset poverty status of households.
    Keywords: social learning, persistent poverty, technology adoption, Ethiopia, Food Security and Poverty, International Development, Research and Development/Tech Change/Emerging Technologies, O31, O33, Q12, Q13,
    Date: 2009–04
  4. By: Michiel J. Bijlsma; Gijsbert T.J. Zwart
    Abstract: In the market for wireless telecommunications, radio spectrum is an essential input. We study downstream entry and capacity choice in this market, where licenses to use radio spectrum are owned by vertically integrated duopolists. Prior to network construction, these incumbents may offer contracts for capacity to an entrant, granting service-based access on the network they will construct. Alternatively, when spectrum trading is allowed, they may sell part of their license, allowing the entrant to build its own network and enter as an infrastructure player. We find that in this Cournot setting, access is generally provided, as incumbents compete to appropriate the profits of serving a differentiated market through the entrant. Although selling spectrum rights instead of network capacity leads to a loss of economies of scale in infrastructure construction, infrastructure-based entry may dominate as a result of a strategic effect. By delegating capacity choice to the entrant, the access providing incumbent can commit to compete more aggressively, causing its rival incumbent to reduce capacity. A lower aggregate capacity will increase prices and thereby profits.
    Keywords: Telecommunications; Vertical Integration; Vertical Foreclosure; Strategic Delegation
    JEL: L13 L42 L96
    Date: 2009–03
  5. By: Manuela Angelucci; Giacomo DeGiorgi; Marcos A. Rangel; Imran Rasul
    Abstract: We present evidence on whether and how a household's behavior is influenced by the presence and characteristics of its extended family. Using household panel data from the Progresa program in rural Mexico, we exploit information on the paternal and maternal surnames of heads and spouses in conjunction with the Spanish naming convention to identify the inter and intra generational family links of each household to others in the same village. We then exploit the randomized research design of the Progresa evaluation data to identify whether the treatment effects of Progresa transfers on secondary school enrolment vary according to the presence and characteristics of extended family. We find that Progresa only raises secondary enrolment among households that are embedded in a family network. Eligible but isolated households do not respond. The mechanism through which the extended family influences household schooling choices is the redistribution of resources within the family network from eligibles that receive de facto unconditional cash transfers from Progresa, towards eligibles on the margin of enrolling their children into secondary school.
    JEL: I21 J12 O12
    Date: 2009–05
  6. By: Michiel Bijlsma; Paul de Bijl; Viktoria Kocsis
    Abstract: This study analyzes under which circumstances it may be desirable for the government to stimulate open source software as a response to market failures in software markets. To consider whether policy intervention can increase dynamic efficiency, we discuss the differences between proprietary software and open source software with respect to the incentives to innovate and market failures that may occur. The document proposes guidelines to determine which types of policy intervention may be suitable. Our most important finding is that directly stimulating open source software, e.g. by acting as a lead customer, can improve dynamic efficiency if (i) there is a serious customer lock-in problem, while (ii) to develop the software, there is no need to purchase specific, complementary inputs at a substantial cost, and (iii) follow-on innovations are socially valuable but there are impediments to contractual agreements between developers that aim at realizing such innovations.
    Keywords: Software markets; Intellectual property rights; Open source software; Public policy
    JEL: L17 L52 L86 O34
    Date: 2009–03

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