nep-net New Economics Papers
on Network Economics
Issue of 2011‒03‒12
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Prevention of Competition by Competition Law: Evidence from Unbundling Regulation on Fiber-Optic Networks in Japan By Naoaki Minamihashi
  2. Seesaw in the Air: Interconnection Regulation and the Structure of Mobile Tariffs By Christos Genakos; Tommaso Valletti
  3. Regulated Expansion of Electricity Transmission Networks: The Effects of Fluctuating Demand and Wind Generation By Wolf-Peter Schill; Juan Rosellón; Jonas Egerer
  4. Clusters, Networks and Creativity By Karlsson, Charlie
  5. Rewiring World Trade. Part I: A Binary Network Analysis By Tiziano Squartini; Giorgio Fagiolo; Diego Garlaschelli
  6. Rewiring World Trade. Part II: A Weighted Network Analysis By Tiziano Squartini; Giorgio Fagiolo; Diego Garlaschelli
  7. Exact maximum-likelihood method to detect patterns in real networks By Tiziano Squartini; Diego Garlaschelli

  1. By: Naoaki Minamihashi
    Abstract: This paper finds that a regulation that promotes competition in one market may decrease competition in other related markets. Policy makers in the telecommunication industry currently are facing an important decision about whether to continue unbundling regulations on new optical-fiber lines. I find that unbundling regulation prevents new providers from building optical-fiber networks, by estimating a dynamic entry game with a dataset of fiber-optic network constructions in Japan from 2005 to 2009. In particular, when a new technology is introduced, unbundling regulation has an oligopolization effect on the regulated firms. This finding in the Japanese telecommunications industry suggests that unbundling regulation during periods of new technology diffusion may reduce the price of service but also decrease competition in the infrastructure market.
    Date: 2011–03
  2. By: Christos Genakos; Tommaso Valletti
    Abstract: Interconnection rates are a key variable in telecommunications markets. Every call that is placed must be terminated by the network of the receiving party, thus the termination end has the characteristic of an economic bottleneck and is subject to regulation in many countries. This paper examines the impact of regulatory intervention to cut termination rates of calls to mobile phones. We argue that regulatory cuts should have a differential impact according to the type of tariff the mobile customer subscribes to. While all mobile customers may pay higher prices because of a "waterbed" effect, termination rates also affect competition among mobile operators. We show that the waterbed effect is diluted, but not eliminated, for customers with pre-paid cards, where regulation also acts as impediment to "raise-each-other's-cost" collusive strategies that mobile networks can adopt. The waterbed effect is instead strongest for consumers with monthly (post-paid) subscription contracts.
    Keywords: Interconnection, network competition, regulation, mobile phones
    JEL: L13 L51
    Date: 2011–02
  3. By: Wolf-Peter Schill; Juan Rosellón; Jonas Egerer
    Abstract: We study the performance of different regulatory approaches for the expansion of electricity transmission networks in the light of realistic demand patterns and fluctuating wind power. In particular, we are interested in the relative performance of a combined merchant-regulatory mechanism compared to a cost-based and a merchant-like approach. In contrast to earlier research, we explicitly include both an hourly time resolution and fluctuating wind power, which allows representing demand in a very realistic way. This substantially increases the real-world applicability of results compared to previous analyses, which were based on simplifying assumptions. We show that a combined merchant-regulatory regulation, which draws on a cap over the two-part tariff of the Transco, leads to welfare outcomes far superior to the modeled alternatives. This result proves to be robust over a range of different cases and sensitivity analyses. We also find that the intertemporal rebalancing of the two-part tariff carried out by the Transco so as to expand the network is such that the fixed tariff part turns out to be relatively large compared to extension costs.
    Keywords: Electricity, Regulation, Transmission Expansion, Wind Power
    JEL: Q40 L51 D42
    Date: 2011
  4. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: An extensive amount of studies have been devoted to the importance of the creative process. Creativity is critical to research and in particular to innovation, a key feature of economic competitiveness. Most of the previous studies have dealt with the creativity of individuals, the creativity of teams and the importance of the organisational context. This chapter, however, emphasises the role of the characteristics of the local and regional economic milieu where the creative process takes place and the local and non-local networks of such milieus. Both the local ‘buzz’ related to interaction and learning opportunities, and non-local networks associated with integration of different milieus, offer special but different advantages for creative activities. The milieu will play an important role in creativity by supplying both a large number of incompatible ideas and good conditions for bringing them together in order to gain new, profound insights. Local accessibility, i.e. clustering, of incompatible ideas and the interregional accessibility to incompatible ideas in other regions are a function of the network characteristics of the local milieu. The purpose of this chapter is to explore the spatial concentration of creativity and the role of clustering and networks in stimulating creative regional economic milieus. One of the arguments of the chapter highlights how clustering of creative agents and creative processes in specific locations generates creative advantages that stimulate creativity and the in-migration of creative agents. Furthermore, the chapter stresses the idea that a better connected economic milieu to other economic milieus via networks transmitting new ideas, information knowledge, etc., will generate higher creative potential of that economic milieu.
    Keywords: creativity; creative process; clusters; artistic clusters; network theory; regional economics; local milieu; local and non-local interaction; innovation
    JEL: O31 R11
    Date: 2010–10–28
  5. By: Tiziano Squartini; Giorgio Fagiolo; Diego Garlaschelli
    Abstract: The international trade network (ITN) has received renewed multidisciplinary interest due to recent advances in network theory. However, it is still unclear whether a network approach conveys additional, nontrivial information with respect to traditional international-economics analyses that describe world trade only in terms of local (rst-order) properties. In this and in a companion paper, we employ a recently-proposed randomization method to assess in detail the role that local properties have in shaping higher-order patterns of the ITN in all its possible representations (binary/ weighted, directed/undirected, aggregated/disaggregated) and across several years. Here we show that, remarkably, all the properties of all binary projections of the network can be completely traced back to the degree sequence, which is therefore maximally informative. Our results imply that explaining the observed degree sequence of the ITN, which has not received particular attention in economic theory, should instead become one the main focuses of models of trade.
    Date: 2011–03–07
  6. By: Tiziano Squartini; Giorgio Fagiolo; Diego Garlaschelli
    Abstract: In this sequel to a companion paper, we complement our analysis of the binary projections of the International Trade Network (ITN) by considering its weighted representations. We show that, unlike the binary case, all possible weighted representations of the ITN (directed/undirected, aggregated/ disaggregated) cannot be traced back to local structural properties, which are therefore of limited informativeness. Our results highlight that any topological property representing only partial information (e.g., degree sequences) cannot in general be obtained from the corresponding weighted property (e.g., strength sequences). Therefore the expectation that weighted structural properties oer a more complete description than purely topological ones is misleading. Our analysis of the ITN detects indirect eects that are not captured by traditional macroeconomic analyses focused only on weighted rst-order country-specic properties, and highlights the limitations of models and theories that overemphasize the need to reproduce and explain such properties.
    Date: 2011–03–07
  7. By: Tiziano Squartini; Diego Garlaschelli
    Abstract: In order to detect patterns in real networks, randomized graph ensembles that preserve only part of the topology of an observed network are systematically used as fundamental null models. However, their generation is still problematic. The existing approaches are either computationally demanding and beyond analytic control, or analytically accessible but highly approximate. Here we propose a solution to this long-standing problem by introducing an exact and fast method that allows to obtain expectation values and standard deviations of any topological property analytically, for any binary, weighted, directed or undirected network. Remarkably, the time required to obtain the expectation value of any property is as short as that required to compute the same property on the single original network. Our method reveals that the null behavior of various correlation properties is different from what previously believed, and highly sensitive to the particular network considered. Moreover, our approach shows that important structural properties (such as the modularity used in community detection problems) are currently based on incorrect expressions, and provides the exact quantities that should replace them.
    Date: 2011–02–28

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