nep-net New Economics Papers
on Network Economics
Issue of 2011‒04‒02
eight papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Spatial Competition, Network Externalities, and Market Structure: An Application to Commercial Banking. By Spitzer, Matthew L; Talley, Eric
  2. Organisational Structures in Network Industries – An Application to the Railway Industry By Benjamin Pakula; Georg Götz
  3. Estimating Causal Installed-Base Effects: A Bias-Correction Approach By Narayanan, Sridhar; Nair, Harikesh S.
  4. Bank Credit and Business Networks By Khwaja, Asim Ijaz; Mian, Atif; Qamar, Abid
  5. The role of reciprocation in social network formation, with an application to blogging By Alexia Gaudeul; Caterina Giannetti
  6. Informal Social Networks, organised crime and local labour market By Antonella Mennella
  7. The strength of strong ties: Co-authorship and productivity among Italian economists By Giulio Cainelli; Mario Maggioni; Erika Uberti; Annunziata De Felice
  8. A Local Search Algorithm for Clustering in Software as a Service Networks By Gaast, J.P. van der; Rietveld, C.A.; Gabor, A.F.; Zhang, Y.

  1. By: Spitzer, Matthew L; Talley, Eric
    Keywords: Law
    Date: 2011–03–24
  2. By: Benjamin Pakula (University of Giessen); Georg Götz (University of Giessen)
    Abstract: This paper analyses the incentives to upgrade input quality in vertically related (network) industries. Upstream investments have a biased effect on the downstream companies and lead to vertical product differentiation. Different vertical structures such as vertical integration, ownership and legal unbundling lead to different investments. We find that, without regulation, vertical integration and legal unbundling regimes provide highest investment incentives and lead to highest welfare. However, we also find foreclosure in the downstream market if the potential degree of horizontal product differentiation of the entrant is low. Under ownership unbundling, investment incentives are lower but there is never foreclosure of the entrant since this would worsen double marginalisation. When the network operator is subject to a break-even regulation, the investment incentives are crowded out under legal and ownership unbundling whereas they remain nearly unchanged under vertical integration. Welfare and co umer surplus decrease under legal unbundling, but increase under the two other regimes.
    Keywords: Vertical Integration, Investment, Foreclosure, Regulation
    JEL: D2 D4 L43 L51 L92
    Date: 2011
  3. By: Narayanan, Sridhar (Stanford University); Nair, Harikesh S. (Stanford University)
    Abstract: New empirical models of consumer demand that incorporate social preferences, observational learning, word-of-mouth or network effects have the feature that the adoption of others in the reference group - the "installed-base" - has a causal effect on current adoption behavior. Estimation of such causal installed-base effects is challenging due to the potential for spurious correlation between the adoption of agents, arising from endogenous assortive matching into social groups (or homophily) and from the existence of unobservables across agents that are correlated. In the absence of experimental variation, the preferred solution is to control for these using a rich specification of fixed-effects, which is feasible with panel data. We show that fixed-effects estimators of this sort are inconsistent in the presence of installed-base effects; in our simulations, random-effects specifications perform even worse. Our analysis reveals the tension faced by the applied empiricist in this area: a rich control for unobservables increases the credibility of the reported causal effects, but the incorporation of these controls introduces biases of a new kind in this class of models. We present two solutions: an instrumental variable approach, and a new bias-correction approach, both of which deliver consistent estimates of causal installed-base effects. The bias-correction approach is tractable in this context because we are able to exploit the structure of the problem to solve analytically for the asymptotic bias of the installed-base estimator, and to incorporate it into the estimation routine. Our approach has implications for the measurement of social effects using non-experimental data, and for measuring marketing-mix effects in the presence of state-dependence in demand, more generally. Our empirical application to the adoption of the Toyota Prius Hybrid in California reveals evidence for social influence in diffusion, and demonstrates the importance of incorporating proper controls for the biases we identify.
    Date: 2011–03
  4. By: Khwaja, Asim Ijaz (Harvard University); Mian, Atif (University of California, Berkeley); Qamar, Abid (State Bank of Pakistan)
    Abstract: We construct the topology of business networks across the population of firms in an emerging economy, Pakistan, and estimate the value that membership in large yet diffuse networks brings in terms of access to bank credit and improving financial viability. We link two firms if they have a common director. The resulting topology includes a "giant network" that is order of magnitudes larger than the second largest network. While it displays "small world" properties and comprises 5 percent of all firms, it accesses two-thirds of all bank credit. We estimate the value of joining this giant network by exploiting "incidental" entry and exit of firms over time. Membership increases total external financing by 16.6 percent, reduces the propensity to enter financial distress by 9.5 percent, and better insures firms against industry and location shocks. Firms that join improve financial access by borrowing more from new lenders, particularly those already lending to their (new) giant-network neighbors. Network benefits also depend critically on where a firm connects to in the network and on the firm's pre-existing strength.
    JEL: D02 D85 L14 O16
    Date: 2011–03
  5. By: Alexia Gaudeul (Graduate School "Human Behavior in Social and Economic Change" (GSBC), Friedrich Schiller University, Jena); Caterina Giannetti (Graduate School "Human Behavior in Social and Economic Change" (GSBC), Friedrich Schiller University, Jena)
    Abstract: This paper deals with the role of reciprocation in the formation of individuals' social networks, that is to what extent initiating a relation brings about its reciprocation. Following the activity of a panel of bloggers over more than a year, we seek to establish whether bloggers are mainly involved in social networking or are part of the media industry. We adapt a standard capital investment model to study the effect of reciprocation on the building of social capital. Results of our analysis confirm that activity and reciprocation both play a role in the dynamics of social media.
    Keywords: Bloggers, Friendship, LiveJournal, Media, Panel Data, Reciprocation, Reci procity, Social Capital, Social Media, Social Networks
    JEL: C33 D85 L82
    Date: 2011–03–22
  6. By: Antonella Mennella
    Abstract: This paper’s purpose is to show a new informal social networks interpretation, according to which social networks change their nature if they are located in social contexts where organised crime is relevant. Here the perusal of a social network is just a necessary condition to enter the labour market rather than a deliberate choice. Moreover this labour market is the ground where favouritisms and social and electoral consensus policies take place.
    Keywords: social networks, organised crime, labour market
    JEL: D85 J64 K00
    Date: 2011–03
  7. By: Giulio Cainelli (Università di Padova); Mario Maggioni (Università Cattolica del Sacro Cuore); Erika Uberti (Università Cattolica del Sacro Cuore); Annunziata De Felice (Università degli Studi di Bari)
    Abstract: Increased specialization and extensive collaboration are common behaviours in the scientific community, as well as the evaluation of scientific research based on bibliometric indicators. This paper aims to analyse the effect of collaboration (co-authorship) on the scientific output of Italian economists. We use Social Network Analysis to investigate the structure of co-authorship, and econometric methodologies to explain the productivity of individual Italian economists, in terms of "attributional" variables (such as age, gender, academic position, tenure, scientific sub-discipline, geographical location, etc.), "relational" variables (such as propensity to cooperate and the stability of cooperation patterns) and "positional" variables (such as betweenness and closeness centrality indexes and clustering coefficients).
    Keywords: co-authorship, scientific productivity, Italian economists, social network analysis.
    JEL: I23 I28 J24
    Date: 2010–12
  8. By: Gaast, J.P. van der; Rietveld, C.A.; Gabor, A.F.; Zhang, Y.
    Abstract: In this paper we present and analyze a model for clustering in networks that offer Software as a Service (SaaS). In this problem, organizations requesting a set of applications have to be assigned to clusters such that the costs of opening clusters and installing the necessary applications in clusters are minimized. We prove that this problem is NP-hard, and model it as an Integer Program with symmetry breaking constraints. We then propose a Tabu search heuristic for situations where good solutions are desired in a short computation time. Extensive computational experiments are conducted for evaluating the quality of the solutions obtained by the IP model and the Tabu Search heuristic. Experimental results indicate that the proposed Tabu Search is promising.
    Keywords: Tabu Search;integer programming;software as a service;complexity theory
    Date: 2011–03–02

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