nep-net New Economics Papers
on Network Economics
Issue of 2010‒03‒28
ten papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Role of Negative Intra-Side Externalities in Two-Sided Markets By Helmut Dietl; Markus Lang; Panlang Lin
  2. Acquiring Foreign Languages: A Two-sided Market Approach By Jean Gabszewicz; Victor Ginsburgh; Didier Laussel; Shlomo Weber
  3. Endogenous network formation in patent contests and its role as a barrier to entry By MARINUCCI, Marco; VERGOTE, Wouter
  4. Mechanism design and communication networks By Tomala, Tristan; Renou, Ludovic
  5. Policy-driven EU Research Networks: Impact on the Greek S&T System By Aimilia Protogerou; Yannis Caloghirou; Evangelos Siokas
  6. Design and operations of gas transmission networks By BABONNEAU, FrŽdŽric; NESTEROV, Yurii; VIAL, Jean-Philippe
  7. Labor Migration and Social Networks Participation: Evidence from Southern Mozambique By Juan M. Gallegoy; Mariapia Mendola
  8. Intellectual Property Right Protection in the Software Market By Arai, Yasuhiro
  9. The value of switching costs By Biglaiser, Gary; Crémer, Jacques; Dobos, Gergely
  10. Neighbourhood effects and endogeneity issues By DUJARDIN, Claire; PEETERS, Dominique; THOMAS, Isabelle

  1. By: Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Panlang Lin (Institute for Strategy and Business Economics, University of Zurich)
    Abstract: This paper presents a theoretical model of two-sided markets with both positive inter-side externalities and negative intra-side externalities. It analyzes the net impact of negative intra-side externalities on platform prices, demands and profits in three scenarios: (i) monopoly platforms, (ii) competing platforms with two-sided single-homing, and (iii) competitive bottlenecks. The paper shows that a monopoly platform will produce lower equilibrium profits in the presence of negative intra-side externalities. By contrast, competing platforms with two-sided single-homing enjoy a higher equilibrium profit, whereas the net impact of negative intra-side externalities on the equilibrium profit of competing platforms with one-sided multi-homing (competitive bottlenecks) remains ambiguous. Based on the analysis, we derive implications for platform owners on how to manage negative intra-side externalities.
    Keywords: Two-sided market, platform competition, network externalities
    JEL: D42 D62 L11 L12
    Date: 2010–03
  2. By: Jean Gabszewicz; Victor Ginsburgh; Didier Laussel; Shlomo Weber
    Abstract: We examine patterns of acquiring non-native languages in a model with two languages corresponding to two populations with heterogeneous learning skills, where every individual faces the choice of self learning the foreign language or refraining from doing so. We then introduce a profit-maximizing international school with two divisions (one in each population) so that each individual may now also choose to learn the other language at school. Comparative statics are analyzed in each model, and the solutions of both models are compared.
    Keywords: Communicative benefits, linguistic equilibrium, learning costs.
    JEL: C72 D83 O52 Z13
    Date: 2010
  3. By: MARINUCCI, Marco (UniversitŽ catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); VERGOTE, Wouter (FacultŽs universitaires Saint-Louis, CEREC, B-1000 Bruxelles, Belgium and UniversitŽ catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)
    Abstract: In a setting of R&D co-opetition we study, by using an all-pay auction approach, how collaboration affects strategic decisions during a patent contest, and how the latter influences the possible collaboration network structures the firms can hope to form. The all pay auction approach allows us to 1) endogenize both network formation and R&D intensities and 2) take heterogeneous and private valuations for patents into account. We find that, different from previous literature, the complete network is not always the only pairwise stable network, even and especially if the benefits from cooperating are important. Interestingly, the other possible stable networks all have the realistic property that some firms decide not to participate in the contest. Thus, weak cooperation through network formation can serve as a barrier to entry on the market for innovation. We further show that there need not be any network that survives a well known refinement of pairwise stability, strong stability, which imposes networks to be immune to coalitional deviations.
    Keywords: patent game, networks, R&D cooperation, all-pay auction
    JEL: L14 L24 O32
    Date: 2009–11–01
  4. By: Tomala, Tristan; Renou, Ludovic
    Abstract: This paper studies a mechanism design model where the players and the designer are nodes in a communication network. The authors characterize the communication networks (directed graphs) for which, in any environment (utilities and beliefs), every incentive compatible social choice function is implementable. They show that any incentive compatible social choice function is implementable on a given communication network, in all environments with either common independent beliefs and private values or a worst outcome, if and only if the network is strongly connected and weakly 2-connected. A network is strongly connected if for each player, there exists a directed path to the designer. It is weakly 2-connected if each player is either directly connected to the designer or indirectly connected to the designer through two disjoint paths, not necessarily directed. They couple encryption techniques together with appropriate incentives to secure the transmission of each player’s private information to the designer.
    Keywords: Mechanism design; incentives; Bayesian equilibrium; communication networks; encryption; secure transmission
    JEL: C72 D82
    Date: 2010–01–05
  5. By: Aimilia Protogerou; Yannis Caloghirou; Evangelos Siokas
    Abstract: This paper focuses on the impact of EU-funded collaborative research networks at a national level using a combined method approach, social network analysis and in-depth case study work. First, it examines the participation intensity and role of the Greek organizations in the research network established through the Information Society Technologies priority of the European Community’s 4th, 5th and 6th Framework Programmes. Furthermore, it attempts to assess the impact of the IST research network on the diffusion and deployment of innovation in Greece. Some interesting results with significant policy implications arise: a) Greece exhibits high participation intensity in the EU-funded IST network, b) there are Greek organizations that have assumed an influential role in the network through time, in addition, they are also critical to the connectivity of the more peripheral Greek actors to the IST network, c) the value of the network, lies for the most part in indirect or ‘behavioural’ effects than in immediate project outputs measured in terms of commercialized products or services, d) however, while the knowledge obtained through the network assists organizations to gain better understanding of the market and identify future deployment opportunities this is not always possible due to the lack of sufficient infrastructure and national policies to support market introduction.
    Date: 2010
  6. By: BABONNEAU, FrŽdŽric (Ordecsys, CH-1224 Chne-Bougeries, Switzerland); NESTEROV, Yurii (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); VIAL, Jean-Philippe (Ordecsys, CH-1224 Chne-Bougeries, Switzerland)
    Keywords: gas transmission networks, reinforcement, convex optimization
    Date: 2009–08–01
  7. By: Juan M. Gallegoy; Mariapia Mendola
    Abstract: This paper investigates how social networks in poor developing settings are af- fected if people migrate. By using an unique household survey from two southern regions in Mozambique, we test the role of labor mobility in shaping participation in groups and social networks by migrant sending households in village economies at origin. We find that households with successful migrants (i.e. those receiving either remittances or return migration) engage more in community based social networks. Our findings are robust to alternative definitions of social interaction and to endogeneity concerns suggesting that stable migration ties and higher income stability through remittances may decrease participation constraints and increase household commitment in cooperative arrangements in migrant-sending communities.
    Keywords: International Migration, Social Capital, Networks, Group Participation, Mozambique
    JEL: O17 O15 O12
    Date: 2010–02
  8. By: Arai, Yasuhiro
    Abstract: We discuss the software patent should be granted or not. There exist two types of coping in the software market; reverse engineering and software duplication. Software patent can prevent both types of copies since a patent protects an idea. If the software is not protected by a patent, software producer cannot prevent reverse engineering. However, the producer can prevent the software duplication by a copyright. It is not clear the software patent is socially desirable when we consider these two types of coping. We obtain the following results. First, the number of copy users under the patent protection is greater than that under the copyright protection. Second, the government can increase social welfare by applying copyright protection when the new technology is sufficiently innovative.
    Keywords: Copyright Protection, Intellectual Property Right, Software
    JEL: D42 K39 L86
    Date: 2010–01
  9. By: Biglaiser, Gary; Crémer, Jacques; Dobos, Gergely
    Abstract: We study the consequences of heterogeneity of switching costs in a dynamic model with free entry and an incumbent monopolist. We identify the equilibrium strategies of the incumbent and of the entrants and show that the strategic interactions are more complex and more interesting than either in static models or in models where all consumers have the same switching costs. In particular, we prove that even low switching cost customers have value for the incumbent: when there are more of them its prots increase. Indeed, their presence hinders entrants who nd it more costly to attract high switching cost customers. This leads to dierent comparative statics: for instance, an increase in the switching costs of all consumers can lead to a decrease in the prots of the incumbent.
    Date: 2010–02–03
  10. By: DUJARDIN, Claire (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); PEETERS, Dominique (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); THOMAS, Isabelle (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: A recent body of research suggests that the spatial structure of cities might influence the socioeconomic characteristics and outcomes of their residents. In particular, the literature on neighbourhood effects emphasizes the potential influence of the socioeconomic composition of neighbourhoods in shaping individualÕs behaviours and outcomes, through social networks, peer influences or socialization effects. However, empirical work still has not reached a consensus regarding the existence and magnitude of such effects. This is mainly because the study of neighbourhood effects raises important methodological concerns that have not often been taken into account. Notably, as individuals with similar socio-economic characteristics tend to sort themselves into certain parts of the city, the estimation of neighbourhood effects raises the issue of location choice endogeneity. Indeed, it is difficult to distinguish between neighbourhood effects and correlated effects, i.e. similarities in behaviours and outcomes arising from individuals having similar characteristics. This problem, if not dequately corrected for, may yield biased results. In the first part of this paper, neighbourhood effects are defined and some methodological problems involved in measuring such effects are identified. Particular attention is paid to the endogeneity issue, giving a formal definition of the problem and reviewing the main methods that have been used in the literature to try to solve it. The second part is devoted to an empirical illustration of the study of neighbourhood effects, in the case of labour-market outcomes of young adults in Brussels. The effect of living in a deprived neighbourhood on the unemployment probability of young adults residing in Brussels is estimated using logistic regressions. The endogeneity of neighbourhood is addressed by restricting the sample to young adults residing with their parents. Then, a ensitivity analysis is used to assess the robustness of the results to the presence of both observed and unobserved parental covariates.
    Keywords: neighbourhood effects, endogeneity, self-selection, sensitivity analysis, Brussels
    JEL: R0 J6 C1
    Date: 2009–09–01

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