nep-net New Economics Papers
on Network Economics
Issue of 2010‒01‒10
thirteen papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. System Size, Lock-in and Network Effects for Patient Records By Catherine Tucker; Amalia Miller
  2. A Comprehensive Approach for Computation and Implementation of Efficient Electricity Transmission Network Charges By Luis Olmos; Ignacio J. Pérez-Arriaga
  3. Regulating two-sided markets: an empirical investigation By Santiago Carbó Valverde; Sujit Chakravorti; Francisco Rodríguez-Fernández
  4. The Global Networks of Multinational Firms By Laura Alfaro; Maggie Chen
  5. Social Comparisons and Reference Group Formation: Some Expermental Evidence By Ian McDonald; Nikos Nikiforakis; Nilss Olekalns; Hugh Sibly
  6. Crowdsourcing: What can be Outsourced to the Crowd, and Why ? By Eric Schenk; Claude Guittard
  7. Endogenous Unions Formation. By Yolanda Chica; María Paz Espinosa
  8. Social Networks By de Martí, Joan; Zenou, Yves
  9. Fits and Misfits : Technological Matching and R & D Networks By Nicolas Jonard; R. Cowan; B. Sanditov
  10. Online communities of payments and consumer behaviour By Olivier Hueber
  11. How to make a fragile network robust and vice versa By Andre A. Moreira; Jose S. Andrade Jr.; Hans J. Herrmann; Joseph O. Indekeu
  12. Turnout Intention and Social Networks. By Constanza Fosco; Annick Laruelle; Angel Sanches
  13. On the attribution of externalities By Verena Utikal; Urs Fischbacher

  1. By: Catherine Tucker (MIT Marketing); Amalia Miller (Economics Department, University of Virginia)
    Abstract: We examine empirically whether the size of a firm using a network affects the scope of its network usage, and consequently network effects and lock-in within the network. We use the example of hospital information exchange. We find that hospitals in larger hospital systems are more likely to exchange electronic patient information only within their system and less likely to exchange patient information externally. We show that hospitals are also more likely to exchange information externally if others hospitals also do so. This implies that the disinclination of large hospital systems to exchange data externally harms overall levels of network use. Our results highlight that makers of technology policy designed to encourage the optimal use of networks should consider regulating the behavior of network users as well as technology vendors.
    Keywords: Technology Diffusion, Health-care IT, Network Externalities, Hospitals
    JEL: I1 K2 L5 O3
    Date: 2009–08
  2. By: Luis Olmos; Ignacio J. Pérez-Arriaga
    Abstract: This paper presents a comprehensive design of electricity transmission charges that are meant to recover regulated network costs. In addition, these charges must be able to meet a set of inter-related objectives. Most importantly, they should encourage potential network users to internalize transmission costs in their location decisions, while interfering as least as possible with the short-term behaviour of the agents in the power system, since this should be left to regulatory instruments in the operation time range. The paper also addresses all those implementation issues that are essential for the sound design of a system of transmission network charges: stability and predictability of the charges; fair and efficient split between generation and demand charges; temporary measures to account for the low loading of most new lines; number and definition of the scenarios to be employed for the calculation and format of the final charges to be adopted: capacity, energy or per customer charges. The application of the proposed method is illustrated with a realistic numerical example that is based on a single scenario of the 2006 winter peak in the Spanish power system.
    Date: 2009–07
  3. By: Santiago Carbó Valverde; Sujit Chakravorti; Francisco Rodríguez-Fernández
    Abstract: We study the effect of government encouraged or mandated interchange fee ceilings on consumer and merchant adoption and usage of payment cards in an economy where card acceptance is far from complete. We believe that we are the first to use bank- level data to study the impact of interchange fee regulation. We find that consumer and merchant welfare improved because of increased consumer and merchant adoption leading to greater usage of payment cards. We also find that bank revenues increased when interchange fees were reduced although these results are critically dependent on merchant acceptance being far from complete at the beginning and during the implementation of interchange fee ceilings. In addition, there is most likely a threshold interchange fee below which social welfare decreases although our data currently does not allow us to quantify it.
    Date: 2009
  4. By: Laura Alfaro (Harvard Business School, Business, Government & the International Economy Unit); Maggie Chen
    Abstract: In this paper we characterize the topology of global multinational networks and examine the macro and micro patterns of multinational activity. We construct indices of network density at both pairwise industry and establishment level and measure agglomeration in a global and continuous metric space. These indices exhibit distinct advantages compared to traditional measures of agglomeration including the independence on the level of geographic aggregation. Estimating the indices using a new worldwide establishment dataset, we investigate both the significance and causes of multinational firm co-agglomeration. In contrast to the conventional emphasis of the literature on the role of input-output linkages, we assess the effect of various agglomeration economies. We find that, relative to counterfactuals, multinationals with greater factor-market externalities, knowledge spillovers, and vertical linkages exhibit significant co-agglomeration. The importance of these factors differs across headquarters, subsidiary, and employment networks, but knowledge spillovers and capital-market externalities, two traditionally under-emphasized forces, exert consistently strong effects. Within each macro network, there is a large heterogeneity across subsidiaries. Subsidiaries with greater size and higher productivity attract significantly more agglomeration than their counterfactuals and become the hubs of the network.
    JEL: F2 D2 R1 R3
    Date: 2009–12
  5. By: Ian McDonald; Nikos Nikiforakis; Nilss Olekalns; Hugh Sibly
    Abstract: We investigate reference group formation and the impact of social comparisons on ultimatum bargaining using a laboratory experiment. Three individuals compete in a real-e¤ort task for the role of the proposer in a three-player ultimatum game. The role of the responder is randomly allocated. The third individual receives a ?fixed payment - our treatment variable - and makes no decision. The existence of a non-responder has a dramatic e¤ect on bargaining outcomes. In the most extreme treatment, more than half of the o¤ers are rejected. Behavior shows individuals exhibit self-serving bias in the way they de?ne their reference groups.
    Keywords: social comparisons; ultimatum bargaining; laboratory experiments; self-serving bias; real-e¤ort
    JEL: C78 C91 D63
    Date: 2009
  6. By: Eric Schenk (LGeco - Laboratoire de Génie de la Conception - Institut National des Sciences Appliquées de Strasbourg, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg); Claude Guittard (BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université Louis Pasteur - Strasbourg I)
    Abstract: Why should a firm outsource certain activities in countries where labor is inexpensive, when by using the Internet, firms are a mouse click away from an eclectic, university educated, population ready to invest in intellectually stimulating projects for little or no remuneration ? The word Crowdsourcing –a compound contraction of Crowd and Outsourcing, was used by Howe in order to define outsourcing to the crowd. Beyond cost, benefits for the company can be substantial. It can externalize the risk of failure and it only pays for products or services that meet its expectations. The aim of this paper is to characterize Crowdsourcing from a management science perspective. Our approach is mainly theoretical, although we rely on extensive illustrations. First we discuss the definition of Crowdsourcing, and provide examples that illustrate the diversity of Crowdsourcing practices. Then, we present similarities and differences between Crowdsourcing and established theories (Open Innovation, User Innovation) and a phenomenon that has inspired many studies in Economics and Management, Open Source Software. Our goal is to avoid future misunderstandings and to show that Crowdsourcing is a concept per se. Finally, we propose and illustrate a typology of Crowdsourcing practices based on two criteria: the integrative or selective nature of the process and the type of tasks that are crowdsourced (routine, complex and creative tasks). In either case, the client firm seeks to mobilize external competencies. Relying upon the crowd can be an adequate method, because of its unique characteristics that are fostered by the Internet.
    Keywords: Web 2.0; Crowdsourcing; Open Source: Open Innovation; User Innovation
    Date: 2009–12–07
  7. By: Yolanda Chica (Universidad del País Vasco. Departamento Economía Financiera.); María Paz Espinosa (Universidad del País Vasco. Departamento Fundamentos del Análisis Económico II.)
    Abstract: This paper analyzes the process of endogenous union formation in the context of a sequential bargaining model between a firm and several unions and tries to explain why workers may be represented by several unions of different sizes. We show that the equilibrium number of unions and their relative size depend on workers\' attitudes toward the risk of unemployment and union configuration is independent of labor productivity.
    Keywords: Endogenous union formation; Constant relative risk aversion; Sequential bargaining; M
    JEL: J51 J52
    Date: 2009–12–10
  8. By: de Martí, Joan (Universitat Pompeu Fabra); Zenou, Yves (Stockholm University)
    Abstract: We survey the literature on social networks by putting together the economics, sociological and physics/applied mathematics approaches, showing their similarities and differences. We expose, in particular, the two main ways of modeling network formation. While the physics/applied mathematics approach is capable of reproducing most observed networks, it does not explain why they emerge. On the contrary, the economics approach is very precise in explaining why networks emerge but does a poor job in matching real-world networks. We also analyze behaviors on networks, which take networks as given and focus on the impact of their structure on individuals’ outcomes. Using a game-theoretical framework, we then compare the results with those obtained in sociology.
    Keywords: random graph, game theory, centrality measures, network formation, weak and strong ties
    JEL: A14 C72 D85 Z13
    Date: 2009–12
  9. By: Nicolas Jonard; R. Cowan; B. Sanditov (CREA, University of Luxembourg)
    Abstract: This paper presents an economic model of R&D network formation through the creation of strategic alliances. Firms are randomly endowed with knowledge elements. They base their alliance decisions purely on the technological fit of potential part- ners, ignoring social capital considerations and indirect benefits on the network. This is sucient to generate equilibrium networks with the small world properties of ob- served alliance networks, namely short pairwise distances and local clustering. The equilibrium networks are more clustered than "comparable" random graphs, while they have similar characteristic path length. Two extreme regimes of competition are examined, to show that while the competition has a quantitative eect on the equilibrium networks (density is lower with competition), the small world features of the equilibrium networks are preserved.
    JEL: D85
    Date: 2009
  10. By: Olivier Hueber (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis)
    Abstract: This paper asserts that the online communities of electronic money (e-money) users affect the traditional mechanisms of price determination by introducing anonymity in money payments. By studying the Second Life case it is possible to show the main characteristics of such a communities and raise new questions linked to the online behaviours of the consumers. In the aim of shedding light on the online consumer behaviour we turn to Thorstein Veblen works and to network externalities concepts.
    Date: 2008–09–01
  11. By: Andre A. Moreira; Jose S. Andrade Jr.; Hans J. Herrmann; Joseph O. Indekeu
    Abstract: We investigate topologically biased failure in scale-free networks with degree distribution $P(k) \propto k^{−\gamma}$ . The probability $p$ that an edge remains intact is assumed to depend on the degree $k$ of adjacent nodes $i$ and $j$ through $p_{ij} \propto (k_i k_j )^{−\alpha}$ . By varying the exponent $\alpha$, we interpolate between random ($\alpha = 0$) and systematic failure. For $\alpha > 0 (< 0)$ the most (least) connected nodes are depreciated first. This topological bias introduces a characteristic scale in $P(k)$ of the depreciated network, marking a crossover between two distinct power laws. The critical percolation threshold, at which global connectivity is lost, depends both on $\gamma$ and on $\alpha$. As a consequence, network robustness or fragility can be controlled through fine tuning of the topological bias in the failure process.
    Keywords: Network, Robustness, Topology, Control
    Date: 2009–04–21
  12. By: Constanza Fosco (Universidad Carlos III Madrid); Annick Laruelle (Ikerbasque and University of the Basque Country); Angel Sanches (Universidad Carlos III Madrid)
    Abstract: How can networking affect the turnout in an electrion? We present a simple model to explain turnout as a result of a dynamic process of formation of the intention to vote within Erdös-Renyi random networks. Citizens have fixed preferences for one of two parties and are embedded in a given social network. They decide whether or not to vote on the basis of the arritude of their immediate contacts. They may simply follow the behavior of the majority (followers) or make an adaptative local calculus of voting (Downsian behavior). So they either have the intention of voting when the majority of their social neighborhood that elections are "close". We study the long run average turnout, interpreted as the actual turnout observed in an lection. Depending on the combination of values of the two key parameters, the average connectivity and the probability of behaving as a follower or in a Downsian fashion, the system exhibits monostability (zero turnout), bistability (zero, moderate and high turnout). This means, in partituclar, that for a wide range of values ob both parameters, we obtain realistic turnout rates, i.e. between 50% and 90%.
    Keywords: Turnout, Social Networks, Adaptative Behavior
    Date: 2009–09–03
  13. By: Verena Utikal; Urs Fischbacher
    Abstract: Do people blame or praise others for producing negative or positive externalities? The experimental philosopher Knobe conducted a questionnaire study that revealed that people blame others for foreseen negative externalities but do not praise them for foreseen positive ones. We find that the major determinant of the Knobe effect is the relative distribution of economic power among the agents. We confirm the Knobe effect only in situations where the producer of the externality holds the higher economic status and the positive externalities are small. Switching economic power makes the Knobe effect vanish. The Knobe effect is even reversed in settings with large positive externalities. Our results are in line with theoretical predictions by Levine.
    Keywords: Intentions, Externalities, Experiment
    Date: 2009

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