nep-net New Economics Papers
on Network Economics
Issue of 2009‒08‒22
three papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  2. Priority and Internet Quality By Kruse, Joern
  3. Bargaining and social structure By Edoardo Gallo

  1. By: Juliette Rouchier (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); Paola Tubaro (CMH - Centre Maurice Halbwachs - CNRS : UMR8097 - Université de Caen - Ecole Normale Supérieure de Paris - ENS Paris - Ecole des Hautes Etudes en Sciences Sociales)
    Abstract: The co-evolution of social networks and opinion formation has received increasing attention in recent years. As a contribution to the growing literature on this topic, we explore connections between empirical data representing the advice network of judges at the Commercial Court in Paris and an agent-based simulation protocol testing various hypotheses on the motives that drive agent behaviors. A previous work (Rouchier et al. 2007) had already modeled the dynamics of advice-seeking among judges and studied the implications of different rationality assumptions on the shape of the emerging network. Here, we add an influence model to the previously examined advice-seeking relationships in order to explore the possibility that there is a form of “culture” at the Court that harmonizes the opinions of members over time; we identify a set of relevant stylized facts, and we use new indicators to evaluate how agents choose with whom to interact within this framework. The basic assumptions we analyze are that they seek advice from senior judges who are higher up in the hierarchy, who enjoy high reputation, or who are similar to them. Our simulations test which criterion –or which combination of criteria– is most credible, by comparing both the properties of the emerging network and the dynamics of opinion at the Court to the stylized facts. Our results single out the combination of criteria that most likely guide individuals' selection of advisors and provide insight into their effects on opinion formation.
    Keywords: Advice network ; Agent-Based Simulation ; Influence Model ; Opinion Dynamics ; Hierarchy ; Reputation
    Date: 2009–08–07
  2. By: Kruse, Joern (Helmut Schmidt University, Hamburg)
    Abstract: The significant increase of internet traffic is to a large extent caused by more high-data-rate applications like file-sharing etc. Although network operators constantly increase router and line capacities, overload occurs from time to time, causing delays, jitter and packet-losses at the data packet level. At the service level this may significantly reduce the quality of certain applications. Among those are interactive services like VoIP, some business applications, online gaming etc. and other on-time-services like internet-television.<p> This will result in systematic inefficiencies which can mainly be attributed to two reasons. The first one is the widespread use of internet-flatrates and the second one is a much too strict interpretation of the network neutrality principle. The latter describes the fact that every single data packet will be handled strictly equal at every router, no matter what application it belongs to and what the technical and economic consequences of delayed or dropped packets will be. <p> A congestion model shows that flatrates which users' marginal outlays cause to be zero are inefficient as soon as positive marginal overload externalities exist. It comes up with a general pricing solution which will be questioned later on. In this framework, optimal internet capacity is identified and the networks' overprovisioning policy is found to be inefficient. <p>The key issue for internet congestion problem is the fact that, although services are homogenous at the data packet level, they are very heterogenous at the service level. They are very different with respect to data rate, quality-sensitivity, and economic value.<p> Under strict network neutrality rule it can be demonstrated that certain valuable, quality-sensitive services will be significantly harmed (and potentially be crowded out altogether) by non-qualitysensitive, high-data-rate services which may have low economic value. Giving priority to certain services in overload situations looks like the adequate solution to the problem. However, this always bears the risk of discriminating some service providers and applications and will be heavily debated. A more appropriate solution is provided by priority pricing, whereby users express their willingness to pay for priority treatment in case of an overload. Customers have an ex ante choice between different qualities of service. The choice of a service provider to pay for high priority (high quality of service) will depend mainly on two factors, the quality-sensitivity and the end-users' willingness to pay for such services. Only providers of quality-sensitive services will have any reason whatsoever to pay for traffic prioritization. Providers of non-quality-sensitive services (file sharing, e-mailing, webbrowsing) will be adequately served by best effort traffic and will thus obtain it cheaply. <p> Priority pricing (quality of service) results in an economically efficient use of scarce router capacity according to the economic congestion effects of the specific service. It avoids the crowding-out problem. It allows to generate more economic value out of a given internet capacity.
    Keywords: Internet; Quality of Service; Priority Pricing; Overprovisioning; Filesharing
    JEL: L86 L96
    Date: 2009–08–19
  3. By: Edoardo Gallo
    Abstract: This paper presents a bargaining model between individuals belonging to different groups where the equilibrium outcome depends on the communication network within each group. Belonging to a group gives an informational advantage: connections help to gather information about past transactions and this information can be used to make more accurate demands in future bargaining rounds. In the long-term there is a unique stochastically stable equilibruim which depends on the peripheral or least connected individuals in each group. Comparative statistics shows that a denser and more homogeneous network allows members of a group to obtain a better deal. An empirical analysis of the observed price differential between Asian and white buyers in New York’s Fulton fish market is consistent with these predictions. An extension explores an alternative set-up where buyers and sellers belong to the same communication network: if the network is regular and the agents are homogeneous then the equilibrium division in 50-50.
    Keywords: Network, Noncooperative bargaining, Core-periphery networks, Fulton fish market, 50-50 division.
    JEL: C73 C78 D83
    Date: 2009

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