nep-net New Economics Papers
on Network Economics
Issue of 2009‒10‒24
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Competition in two-sided markets with common network externalities By Cremer, Helmuth; Bardey, David; Lozachmeur, Jean-Marie
  2. Participation in a Platform Ecosystem: Appropriability, Competition, and Access to the Installed Base By Peng Huang; Marco Ceccagnoli; Chris Forman; D.J. Wu
  3. Location Decisions of Competing Platforms By Konstantinos Serfes; Eleftherios Zacharias
  4. Modeling phase changes of road networks By Arthur Huang; David Levinson
  5. The Influence of Network Structure on Travel Distance By Pavithra Parthasarathi; Hartwig Hochmair; David Levinson
  7. Contacts and Meetings: Location, Duration and Distance Traveled By Nebiyou Tilahun; David Levinson

  1. By: Cremer, Helmuth; Bardey, David; Lozachmeur, Jean-Marie
    Abstract: We study competition in two sided markets with common network externality rather than with the standard inter-group e¤ects. This type of externality occurs when both groups bene…t, possibly with di¤erent intensities, from an increase in the size of one group and from a decrease in the size of the other. We explain why common externality is relevant for the health and education sectors. We focus on the symmetric equilibrium and show that when the externality itself satis…es an homogeneity condition then platforms’ pro…ts and price structure have some speci…c properties. Our results reveal how the rents coming from network externalities are shifted by platforms from one side to other, according to the homogeneity degree. In the speci…c but realistic case where the common network externality is homogeneous of degree zero, platform’s pro…t do not depend on the intensity of the (common) network externality. This is in sharp contrast to conventional results stating that the presence of network externalities in a two-sided market structure increases the intensity of competition when the externality is positive (and decreases it when the externality is negative). Prices are a¤ected but in such a way that platforms only transfer rents from consumers to providers
    Date: 2009–10–15
  2. By: Peng Huang (College of Management, Georgia Tech); Marco Ceccagnoli (College of Management, Georgia Tech); Chris Forman (College of Management, Georgia Tech); D.J. Wu (College of Management, Georgia Tech)
    Abstract: In this study we examine the antecedents of small independent software vendor (ISV) decisions to join a platform ecosystem. Using data on the history of partnering activities from 1201 ISVs from 1996 to 2004, we find that appropriability strategies based on intellectual property rights and the possession of downstream complementary capabilities by ISVs are positively related to partnership formation, and ISVs use these two mechanisms as substitutes to prevent expropriation by the platform owner. In addition, we show that greater competition in downstream product markets between the ISV and the platform owner is associated with a lower likelihood of partnership formation, while the platform’s penetration into the ISV’s target industries is positively associated with the propensity to partner. The results highlight the role of innovation appropriation, downstream complementary capabilities, and collaborative competition in the formation of a platform ecosystem.
    Keywords: platform ecosystem, partnership, intellectual property rights, downstream capabilities
    JEL: L26 L86 O33 O34
    Date: 2009–09
  3. By: Konstantinos Serfes (LeBow College of Business, Drexel University); Eleftherios Zacharias (Athens University of Economics and Business)
    Abstract: There are examples of entry in two-sided markets, where first entrants occupy a `central location' and serve agents with `intermediate tastes', while later entrants are niche players. Why would the first entrant choose to become a `general' platform, given that later entrants will not have enough room for differentiation, resulting in an intense price competition? This one-sided market logic may not apply in a two-sided market. A key difference in a two-sided market, stemming from the presence of cross-group network externalities, is stronger demand creation. We develop a model which can deliver the above mentioned empirical observation, when the network externalities are intermediate. On the other hand, when externalities are low, our model predicts that differentiation will be maximum, as it would be in a one-sided market. Finally, for strong externalities only one platform is active and locates at the center.
    Keywords: Product Selection; Two-sided markets; Endogenous Locations; Cross-group Network Externalities.
    JEL: D43 L13
    Date: 2009–08
  4. By: Arthur Huang; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: Adopting an agent-based approach, this paper explores the topological evolution of road networks from a microscopic perspective. We assume a decentralized decision-making mechanism where roads are built by self-interested land parcel owners. By building roads, parcel owners hope to increase their parcelsÕ accessibility and economic value. The simulation model is performed on a grid-like land use layer with a downtown in the center, whose structure is similar to the early form of many Midwestern and Western (US) cities. The topological attributes for the networks are evaluated by multiple centrality measures such as degree centrality, closeness centrality, and betweenness centrality. Our findings disclose that the growth of road network experiences an evolutionary process where tree-like structure first emerges around the centered parcel before the network pushes outward to the periphery. In addition, road network topology undergoes obvious phase changes as the economic values of parcels vary. The results demonstrate that even without a centralized authority, road networks have the property of self-organization and evolution; furthermore, the rise-and-fall of places in terms of their economic/social values may considerably impact road network topology.
    Keywords: road network, land parcel, network evolution, network growth, phase change
    JEL: D85 R48 R51 R52 R53 H32 H41
    Date: 2009
  5. By: Pavithra Parthasarathi; Hartwig Hochmair; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: The objective of this research is to identify the role of network architecture in influencing individual travel behavior using travel survey data from two urban areas in Florida: Fort Lauderdale and Miami. Various measures of network structure, compiled from existing sources, are used to quantify roadway networks, capture the arrangement and connectivity of nodes and links in the networks and the temporal and spatial variations that exist among and within networks. The results from the regression models estimated show that network design influences how people travel and make decisions. Results from this analysis can be used to understand how changes in network can be used to bring about desired changes in travel behavior.
    Keywords: Network structure, travel behavior, transport geography, commuting, circuity
    JEL: R41 R42 R48 D85 R14 R52
    Date: 2009
  6. By: Roberto Serrano (Brown University); Roland Pongou (Brown University)
    Abstract: We study the dynamic stability of fidelity networks, which are networks that form in a mating economy of agents of two types (say men and women), where each agent desires direct links with opposite type agents, while engaging in multiple partnerships is considered an act of infidelity. Infidelity is punished more severely for women than for men. We consider two stochastic processes in which agents form and sever links over time based on the reward from doing so, but may also take non-beneficial actions with small probability. In the first process, an agent who invests more time in a relationship makes it stronger and harder to break by his/her partner; in the second, such an agent is perceived as weak. Under the first process, only egalitarian pairwise stable networks (in which all agents have the same number of partners) are visited in the long run, while under the second, only anti-egalitarian pairwise stable networks (in which all women are matched to a small number of men) are. Next, we apply these results to find that, in the long run, under the first process, HIV/AIDS is equally prevalent among men and women, while under the second, women bear a greater burden. The key message is that anti-female discrimination does not necessarily lead to (weakly) higher HIV/AIDS prevalence among women in the short run, but it does in the long run.
    Keywords: Fidelity networks, anti-female discrimination, stochastic stability, HIV/AIDS, union formation models.
    JEL: A14 C7 I12 J00
    Date: 2009–09
  7. By: Nebiyou Tilahun; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: The role of contacts on travel behavior has been getting increasing attention. This paper reports on data collected on individualÕs social meetings and the choice of in-home/out-of-home meeting locations as well as the distance travelled and duration of out-home-meetings and its relationship to the type of contact met and other attributes of the meeting. Empirically we show that in-home meetings tend to occur most often with close contacts and less often with distant contacts. The purpose, meeting day, and household size suggest that leisure, weekend and large household size people tend to have their meetings either at their home or at their contactÕs home. In addition when meetings occur outside of the house, the duration is longer for close contacts and distance to the meeting location is directly inßuenced by duration and indirectly by the relationship type. Overall the paper illustrates that relationship type along with other meeting speciÞc and demographic variables is important in explaining the location, duration and distance travelled for social meetings.
    Keywords: Travel behavior, social networks, meetings, network analysis
    JEL: R41 D10 D85 R48
    Date: 2009

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