nep-net New Economics Papers
on Network Economics
Issue of 2010‒01‒23
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Indirect network effects with two salop circles: the example of the music industry By Dewenter, Ralf; Haucap, Justus; Wenzel, Tobias
  2. Ethnic Networks, Information, and International Trade: Revisiting the Evidence By Gabriel J. Felbermayr; Benjamin Jung; Farid Toubal
  3. Network hierarchy in Kirman's ant model: fund investment can create systemic risk By Alfarano, Simone; Milakovic, Mishael; Raddant, Matthias
  4. Persistence of a network core in the time evolution of interlocking directorates By Milakovic, Mishael; Raddant, Matthias; Birg, Laura
  5. Getting beer during commercials: adverse effects of Ad-Avoidance By Stuehmeier, Torben; Wenzel, Tobias
  6. The Role of Socially Concerned Consumers in the Coexistence of Ethical and Standard Firms By Fanelli, Domenico
  7. Strategic evaluations and techno-economic networks. Vaccine innovation in the Cuban biotech sector: for public health – or for profits? By Jens Plahte

  1. By: Dewenter, Ralf; Haucap, Justus; Wenzel, Tobias
    Abstract: This paper analyses the interdependency between the market for music recordings and concert tickets, assuming that there are positive indirect network effects both from the record market to ticket sales for live performances and vice versa. Using a model with two interrelated Salop circles we show that prices in both markets are corrected downwards when compared to the standard Salop model. Furthermore, we show that the effects of file sharing on firms' profitability and on variety are ambiguous. File sharing can increase profits through increased concert ticket demand and thereby also lead to additional market entry and additional variety. --
    Keywords: Music Industry,Indirect Network Effects,Salop Model,File Sharing
    JEL: L13 L82 Z10
    Date: 2009
  2. By: Gabriel J. Felbermayr; Benjamin Jung; Farid Toubal
    Abstract: Influential empirical work by Rauch and Trindade (REStat, 2002) finds that Chinese ethnic networks of the magnitude observed in Southeast Asia increase bilateral trade by at least 60%. We argue that this estimate is upward biased due to omitted variable bias. Moreover, it is partly related to a preference effect rather than to enforcement and/or the availability of information. Applying a theory-based gravity model to ethnicity data for 1980 and 1990, and focusing on pure network effects, we find that the Chinese network leads to a more modest amount of trade creation of about 15%. Using new data on bilateral stocks of migrants from the World Bank for the year of 2000, we extend the analysis to all potential ethnic networks. We find, i.a., evidence for a Polish, a Turkish, a Mexican, or a Pakistani network. While confirming the existence of a Chinese network, its trade creating potential is dwarfed by other ethnic networks. The large heterogeneity in the trade-creating potential of different networks is, among other things, explained by the share of high-skilled immigrants, the degree of ethnic fragmentation, and GDP per capita.
    Keywords: Gravity model; international trade; network effects; international migration
    JEL: F12 F22
    Date: 2009–12
  3. By: Alfarano, Simone; Milakovic, Mishael; Raddant, Matthias
    Abstract: Kirman's ant model has been used to characterize the expectation formation of financial investors who are prone to herding. The model's original version suffers from the problem of N-dependence: its ability to replicate the statistical features of financial returns vanishes once the system size N is increased. In a generalized version of the ant model, the network structure connecting agents turns out to determine whether or not the model is N-dependent. We investigate a class of hierarchical networks in the generalized model that presumably reflect the institutional heterogeneity of financial markets. These network structures do overcome the problem of N-dependence, but at the same time they also increase system-wide volatility. Thus network structure becomes an auxiliary source of volatility in addition to the behavioral heterogeneity of interacting agents. --
    Keywords: herding,financial markets,networks,N-dependence,systemic risk
    Date: 2009
  4. By: Milakovic, Mishael; Raddant, Matthias; Birg, Laura
    Abstract: We examine the bipartite graphs of German corporate boards in 1993, 1999 and 2005, and identify cores of directors who are highly central in the entire network while being densely connected among themselves. Germany's corporate governance has experienced significant changes during this time, and there is substantial turnover in the identity of core members, yet we observe the persistent presence of a network core, which is even robust to changes in the tail distribution of multiple board memberships. Anecdotal evidence suggests that core persistence originates from the board appointment decisions of largely capitalized corporations. --
    Keywords: Network core,density,centrality,interlocking directorates,corporate governance
    Date: 2009
  5. By: Stuehmeier, Torben; Wenzel, Tobias
    Abstract: This paper studies the impact of ad-avoidance behavior in media markets. We consider a situation where viewers can avoid advertisement messages. As the media market is a two-sided market, increased ad-avoidance reduces advertisers' value of placing an ad. We contrast two financing regimes, free-to-air and pay-TV. We find that increased avoidance opportunities decrease profits and entry in the free-to-air regime. In contrast, in the pay-TV regime, lower income from advertisements are compensated by higher subscription income leaving profits and the number of channels unaflected. Bypassing advertising messages affects welfare ambiguously. --
    Keywords: Media Markets,Two-Sided Markets,Ad-avoidance
    JEL: L11 L13
    Date: 2009
  6. By: Fanelli, Domenico
    Abstract: The purpose of this paper is to investigate how socially concerned consumers' preferences affects firms' decisions to commit to social responsibility. In a market in which firms face the same demand function and products are homogeneous, we find that a large group of socially concerned consumers or a low cost of social responsibility induces an equilibrium outcome in which ethical and standard firms coexists in the same market. Our result is relevant because we do not assume a product differentiation setup and firms do not separate the market through labeling schemes.
    Keywords: CSR; Price Competition; Duopoly; ESS; Replicator Dynamics
    JEL: M14 D43 C73
    Date: 2010–01–18
  7. By: Jens Plahte (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: In this paper the Cuban biotech sector with its highly integrated vaccine industry is analyzed in the perspective of the techno-economic network model of Michel Callon. The paper discusses the strategic evaluations that have been performed in the sector. Given the emphasis on public health displayed by the Cuban government and the precarious condition of the Cuban economy (at least during the last 20 years), the strategic evaluations could be seen as an articulation of the (sometimes conflicting) interests of public health and commercialism. The main issue to be discussed in the present paper is how interests related to public health and economic considerations are articulated and balanced in the strategic evaluations that have been made in the Cuban biotech sector. There is a focus on the vaccine related activities of the sector, which will be loosely referred to as the Cuban vaccine industry. This is the first of two papers about the Cuban bitoech sector and vaccine industry.
    Keywords: Innovation systems, techno-economic networks, Cuba, vaccines, biotechnology
    Date: 2010–01

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