nep-net New Economics Papers
on Network Economics
Issue of 2010‒05‒22
fifteen papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Competition in two-sided markets with common network externalities By Bardey, David; Cremer, Helmuth; Lozachmeur, Jean-Marie
  2. Measuring and Analyzing the Openness of the Web2.0 Service Network for Improving the Innovation Capacity of the Web2.0 System through Collective Intelligence By Kibae Kim; Jorn Altmann; Junseok Hwang
  3. (Anti-) Coordination in Networks By Jaromir Kovarik; Friederike Mengel; José Gabriel Romero
  4. Backward Compatibility to Sustain Market Dominance – Evidence from the US Handheld Video Game Industry By Claussen, Jörg; Kretschmer, Tobias; Spengler, Thomas
  5. Estimating the Impact of Access Conditions on Service Quality in Post By Swinand, Gregory; O'Toole, Conor; Lyons, Seán
  6. Public and Private Investments in Regulated Network Industries: Coordination and Competition Issues By Jullien, Bruno; Pouyet, Jérôme; Sand-Zantman, Wilfried
  7. The Pricing of Academic Journals: A Two-Sided Market Perspective By Jeon, Doh-Shin; Rochet, Jean-Charles
  8. Mobile Termination and Mobile Penetration By Hurkens, Sjaak; Jeon, Doh-Shin
  9. The Impact of the Subgroup Structure on the Evolution of Networks: An Economic Model of Network Evolution By Kibae Kim; Jorn Altmann; Junseok Hwang
  10. Strategic Management of Food Networks: Towards Understanding of Network Goals By Gagalyuk, Taras; Hanf, Jon; Ziggers, Gerrit W.
  11. The Role of Trust in Emerging Food Supply Network Relations By Fritz, Melanie
  12. Collaborative Working Environments in Food Supply Networks By Pankiewicz, Maciek; Schiefer, Gerhard; Fritz, Melanie
  13. Kingmakers and leaders in coalition formation By Brams, Steven J.; Kilgour, D. Marc
  14. Supply Chain and Network Performance: Metrics for Profitability, Productivity, and Efficiency By Weaver, Robert D.
  15. Short Food Supply Networks: Expectations, Experiences, Trust in the Case of Farmers Markets By Fritz, Melanie; Martino, Gaetano

  1. By: Bardey, David (University of Rosario, Bogota); Cremer, Helmuth (TSE (GREMAQ-CNRS)); Lozachmeur, Jean-Marie (TSE (GREMAQ-CNRS))
    Abstract: We study competition in two sided markets with common network externality rather than with the standard inter-group effects. This type of externality occurs when both groups bene…fit, possibly with different 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 platformspro…ts and price structure have some speci…fic 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 specifi…c but realistic case where the common network externality is homogeneous of degree zero, platforms 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 affected but in such a way that platforms only transfer rents from consumers to providers.
    JEL: D42 L11 L12
    Date: 2009–10
  2. By: Kibae Kim; Jorn Altmann; Junseok Hwang (Technology Management, Economics and Policy Program(TEMEP), Seoul National University)
    Abstract: Web2.0 users can create new services by combining existing Web2.0 services that offer open programming interfaces. This system of service composition forms a network, which we call the Web2.0 service network. A node of the Web2.0 service network represents a service. A link between two nodes exists, if another Web2.0 service (i.e. mashup) uses the linked services. The Web2.0 service network can be understood as an innovation system that creates value through the composition of services, representing the collective intelligence of users. Within this paper, we analyze the openness of the Web2.0 service network. Openness, which is an indicator for the innovation potential ofa network, is measured using the Enhanced-EIS-Indexes. These indexes are based on Krackhardt and Stern¡¯s EI-Index. The analysis results of the indexes show that the Web2.0 service network is not as open as the evolutionary analysis of the Web2.0 service network suggested. The slight closeness of the Web2.0 service network has been identified by the Agent Behavior Index EISa, which highlighted that relatively more links are created within subgroups than between subgroups. It indicates that factors such as service ownership and type of service have an impact on innovation within the network.
    Keywords: Social network analysis, index, network science, subgroup structure, Web2.0 system, service composition, collective intelligence, Web2.0 service network, performance evaluation, innovation, empirical data analysis
    JEL: C43 D02 D23 D85 L14 L16 L22 L86 L96 M21
    Date: 2010–03
  3. By: Jaromir Kovarik (University of the Basque Country); Friederike Mengel (Maastricht University); José Gabriel Romero (University of Santiago de Chile)
    Abstract: We study (anti-) coordination problems in networks in a laboratory experiment. Partici- pants interact with their neighbours in a fixed network to play a bilateral (anti-) coordination game. Our main treatment variable is the extent to which players are heterogeneous in the number of connections (neighbors) they have. Other network characteristics are held constant across treatments. We find the following results. Heterogeneity in the number of connections dramatically improves the rate of successful coordination. In addition, even though there is a multiplicity of Nash equilibria theoretically, a very sharp selection is observed empirically: the most connected player can impose her preferred Nash equilibrium almost always and observed Nash equilibria are such that all links are coordinated. As a second treatment variation we let agents decide endogenously on the amount of information they would like to have and find that local (endogenous) information is equally efficient in ensuring successful coordination as full information. We provide an intuitive explanation of these facts which is supported by our data.
    Keywords: Game Theory, Networks, Coordination Problems, Experiments
    JEL: C72 C90 C91 D85
    Date: 2010–05
  4. By: Claussen, Jörg; Kretschmer, Tobias; Spengler, Thomas
    Abstract: The introduction of a new product generation forces incumbents in network industries to rebuild their installed base to maintain an advantage over potential entrants. We study if backward compatibility can help moderate this process of rebuilding an installed base. Using a structural model of the US market for handheld game consoles, we show that backward compatibility lets incumbents transfer network effects from the old generation to the new to some extent but that it also reduces supply of new software. We also find that backward compatibility matters most shortly after the introduction of a new generation. Finally, we examine the tradeoff between technological progress and backward compatibility and find that backward compatibility matters less if there is a large technological leap between two generations. We subsequently use our results to assess the role of backward compatibility as a strategy to sustain a dominant market position.
    Keywords: backward compatibility market dominance network effects two-sided markets
    JEL: L15 L82 O33
    Date: 2010–05
  5. By: Swinand, Gregory; O'Toole, Conor; Lyons, Seán
    Abstract: Third party access to postal networks can be made subject to a range of access conditions. While the pricing of postal network access has received much research attention, the effects of access on quality of service have received less. Using data on international postal services in a large panel of European countries, we estimate an econometric model of average time-to-delivery for letter post, including a range of access conditions. We find that several access conditions have a significant association with service quality. Appropriate access conditions may improve service quality.
    Keywords: network access/postal services/service quality
    Date: 2010–05
  6. By: Jullien, Bruno; Pouyet, Jérôme; Sand-Zantman, Wilfried
    Date: 2009–07
  7. By: Jeon, Doh-Shin; Rochet, Jean-Charles
    Abstract: More and more academic journals adopt an open-access policy, by which articles are accessible free of charge, while publication costs are recovered through author fees. We study the consequences of this open access policy on a journal’s quality standard. If the journal’s objective was to maximize social welfare, open access would be optimal as long as the positive externalities generated by its diffusion exceed the marginal cost of distribution. However, we show that if an open access journal has a different objective (such as maximizing readers’ utility, the impact of the journal or its profit), it tends to choose a quality standard below the socially efficient level.
    JEL: D42 L42 L82
    Date: 2009–10
  8. By: Hurkens, Sjaak; Jeon, Doh-Shin
    Abstract: In this paper, we study how access pricing affects network competition when subscription demand is elastic and each network uses non-linear prices and can apply termination-based price discrimination. In the case of a fixed per minute termination charge, we find that a reduction of the termination charge below cost has two opposing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms always prefer termination charge below cost for either motive while the regulator prefers termination below cost only when this boosts penetration. Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008) that determines termination charges as a function of retail prices and show that this approach allows the regulator to increase penetration without distorting call volumes.
    JEL: D4 L96 K23 L51
    Date: 2009–07–28
  9. By: Kibae Kim; Jorn Altmann; Junseok Hwang (Technology Management, Economics and Policy Program(TEMEP), Seoul National University)
    Abstract: One of the most important properties of self-organized networks is their scale-free property. Prior research proved empirically and theoretically that scale-free networks emerge under the preferential attachment rule. However, a few empirical studies also show that empirical networks diverge from the structure of scale-free networks. Empirical networks exhibit a lower exponent of the power law distribution than constructed scale-free networks. Our research aims at establishing a simple evolutionary network model that explains this difference. The results of our model suggest that there are two reasons for this discrepancy. First, as already known, additional links between existing nodes distort the scale-free feature. Second, boundaries between subgroups (groups of network nodes) distort the degree distribution. In general, we believe that our evolutionary model may be applicable not only to describe the structural evolution of networks but also to make network design recommendations in a variety of areas such as WWW-hyperlink networks, business collaboration networks, Peer-To-Peer Networks, and Web2.0 service networks.
    Keywords: Social Network Analysis, Scale-Free Networks, Self-Organization, Evolutionary Model, Network Design, Network Science, Network Modeling.
    JEL: C02 C15 C65 D02 D85 L11 L14 L86 M21
    Date: 2010–03
  10. By: Gagalyuk, Taras; Hanf, Jon; Ziggers, Gerrit W.
    Abstract: Current interorganizational literature almost exclusively analyzes the network effects on single firms participating in networks. This study expands this view theoretically by focusing on food supply chain networks. Specifically, we argue that both, network-level and firm-level goals have to be achieved to structure long-term and successful network relationships. By implementing simultaneously partnering and supply chain management strategies, the networkâs management will ensure goal consensus among the network actors and goal compatibility between the network levels. Thereby, preconditions for the achievement of network-level and firm-level goals will be installed.
    Keywords: Network goals, network levels, goal consensus, goal compatibility, focal company, Agribusiness, Agricultural and Food Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Research and Development/Tech Change/Emerging Technologies,
    Date: 2009–10
  11. By: Fritz, Melanie
    Abstract: The food sector is the largest economic sector in the European Union (CIAA, 2005). It consists of a complex, global and dynamically changing network of trade streams, food supply network relations and related product flows (Fritz, Schiefer, 2008a). Food supply networks are subject to dynamically changing circumstances, which include fluctuations at primary production due to changes in weather or climate, impacting supply and demand and prices, and also impacting the quality of raw material, variations in food consumption due to seasonality or the westernization of diets in Asia (see e.g. OECD-FAO, 2006, Pingali, 2006), the development of alternative uses of raw material such as bio-fuel, and, not the least, from changing attitudes of society towards the consequences of the food systemâs activities for environmental, social and economic issues, captured in the term of âsustainabilityâ (Aiking, de Boer, 2004).
    Keywords: Agribusiness, Agricultural and Food Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty,
    Date: 2009–10
  12. By: Pankiewicz, Maciek; Schiefer, Gerhard; Fritz, Melanie
    Abstract: This paper will discuss the ongoing research in area of conceptualization, design of collaborative working environments and its adoption for food supply networks. There will be a group needs approach for designing such environments presented. Tracking and tracing, agreements on quality policy, improvements in logistics, dissemination of innovations, cooperation in quality planning and market orientation, access to knowledge bases, etc. are all examples which build on an increased horizontal or vertical integration in information and communication activities. For these purposes adoption of collaborative working environments may be of a crucial importance for food supply networks.
    Keywords: collaborative working environment, e-community, e-collaboration., Agribusiness, Agricultural and Food Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty,
    Date: 2009–10
  13. By: Brams, Steven J.; Kilgour, D. Marc
    Abstract: Assume that players strictly rank each other as coalition partners. We propose a procedure whereby they “fall back” on their preferences, yielding internally compatible, or coherent, majority coalition(s), which we call fallback coalitions. If there is more than one fallback coalition, the players common to them, or kingmakers, determine which fallback coalition will form. The first player(s) acceptable to all other members of a fallback coalition are the leader(s) of that coalition. The effects of different preference assumption--particularly, different kinds of single-peakedness--and of player weights on the number of coherent coalitions, their connectedness, and which players become kingmakers and leaders are investigated. The fallback procedure may be used (i) empirically to identify kingmakers and leaders or (ii) normatively to select them. We illustrate and test the model by applying it to coalition formation on the U.S. Supreme Court, 2005-2009, which shows the build-up over stages of a conservative coalition that prevailed in nearly half of the 5-4 decisions.
    Keywords: coalition formation; fallback procedure; kingmakers; leaders; US Supreme Court
    JEL: D72 C7 D85
    Date: 2010–03
  14. By: Weaver, Robert D.
    Abstract: The architecture of the firm involves determination of a boundary that encompasses the functions managed by the firm. The past decade has seen substantial reorganization of firms where vertical or horizontal integration has been unbundled into weaker forms of collaborations including value chains and networks. This observation has forced a re-conceptualization of the boundaries of the firm to incorporate such collaborations. These collaborations are virtual and highly dynamic. They emerge and persist when two conditions are met. First, they must enable generation of greater value than might be attained through independent operation and anonymous transactions through markets. Second, the resulting growth must be shared with members in a way that retains their participation. Each of these conditions can be verified only if performance of the collaboration can be established. This paper recognizes the need for such âmetrics of performanceâ. While conceptual approaches have been studied in the management literature, this paper considers from theoretic perspectives these issues and derives measures of the performance of the overall collaboration as well as of the participating enterprises. The paper presents a framework that can be applied to both vertical and horizontal collaborations as found in supply chains and networks. The paper offers suggestions on empirical methods for estimation of measures derived.
    Keywords: Networks, Collaboration, metrics, productivity, efficiency, Agribusiness, Agricultural and Food Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty,
    Date: 2009–10
  15. By: Fritz, Melanie; Martino, Gaetano
    Abstract: Farmers Markets are receiving an increasing attention by both food chains actors and social scientists. Economic and sociological studies are contributing to the comprehension of these forms of exchange. Both consumers and producers are fostering their expectations about the renewal of a mode of exchange which sustained local production-consumptions linkages. The main economic function of these organizational structures seems to be the reduction of the price paid by the consumers and the enhancements of allocation of farm products. The basic interpretation of these forms of exchange focuses on market structure, nonetheless the exchange relationships seem to emphasize several dimensions, including economic and cultural aspects. The objective of the paper is of investigating the role of networks among producers and consumers in structuring and making viable the Farmer Markets as structures of short food supply chains. The basic idea is that the strength of Farmer Markets is the ability of satisfying the consumer expectations about a few characteristics of the products, entailing given cultural and economic aspects. The study argues that under this view the Farmer Markets may be thought of as a emerging form of production-consumption interaction. According to existing evidences it is suggested that the network is also the emerging forms of horizontal relationships among the producer participants to the markets. The paper aims at suggesting that basic types of trust act as key factor in structuring the networks and in promoting the stability of the market.
    Keywords: Farmers Markets, networks, trust, food chains sustainability, Agribusiness, Agricultural and Food Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Risk and Uncertainty, D4,
    Date: 2009–10

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