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on Network Economics |
| By: | Catherine Tucker |
| Abstract: | This paper investigates how the destabilizing of a social network may increase the scope of network externalities, using data on sales of a video-calling system made to an investment bank's employees and subsequent usage by these customers. The terrorist attacks of 2001 led potential customers in New York to start communicating with a new and less predictable set of people when their work teams were reorganized as a result of the physical displacement that resulted from the attacks. This did not happen in other comparable cities. These destabilized communication patterns were associated with potential adopters in New York being more likely to take into account a wider spectrum of the user base when deciding whether to adopt relative to those in other cities. Empirical analysis suggests that the aggregate effect of network externalities on adoption was doubled by this instability. |
| JEL: | L0 L86 L96 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17246&r=net |
| 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. In a model with two interrelated Hotelling lines prices in both markets are corrected downwards when compared to the standard Hotelling model. Also, file sharing has ambiguous effects on firms' profitability. As file sharing can indirectly increase demand for live performances overall profits can either increase or decrease, depending on the strength of indirect network effects. Finally, file sharing may induce firms to switch from the traditional business model with two separate firms to an integrated business model where one agency markets both records and concerts (so-called 360 degree deals). -- |
| JEL: | L13 L82 Z10 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:28&r=net |
| By: | Friebel, Guido; Ivaldi, Marc; Pouyet, Jérôme |
| Abstract: | This paper investigates various options for the organization of the railway industry when network operators require the access to multiple national networks to provide international (freight or passenger) transport services. The EU rail system provides a framework for our analysis. Returns-to-scale and the intensity of competition are key to understanding the impact of vertical integration or separation between infrastructure and operation services within each country in the presence of international transport services. We also consider an option in which a transnational infrastructure manager is in charge of offering a coordinated access to the national networks. In our model, it turns out to be an optimal industry structure. |
| Keywords: | Network access; Transport economics; Vertical Separation |
| JEL: | L14 L42 L51 L92 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8491&r=net |
| By: | Duarte Leite (LIAAD – INESC, LA, Faculdade de Economia do Porto, Universidade do Porto); Pedro Campos (LIAAD – INESC, LA, Faculdade de Economia do Porto, Universidade do Porto); Isabel Mota (CEF.UP, Faculdade de Economia do Porto, Universidade do Porto) |
| Abstract: | In this study, we analyze firms’ membership in R&D (Research and Development) cooperation networks. Our main research hypothesis is that the membership in cooperation networks is related to the degree of the knowledge spillover. The approach focus on both cost symmetry and cost asymmetry. For that purpose, our work is developed in two tasks: we first develop an analytical model with three stages: in the first, firms decide whether to participate in a cooperative research network; in the second they simultaneously choose the level of R&D output, and finally firms choose the level of output through Cournot competition under both cost symmetry and cost asymmetry. Then we proceed with computational simulations in order to verify our hypothesis. From our results, we were able to conclude that cooperation leads to an improvement on RJV firms’ position in the market as it allows them to produce more than others with the same production conditions. Additionally, cooperating firms have to spend fewer resources on research, which turns the network a tremendous success on the productive efficiency level. |
| Keywords: | R&D, networks, spillover, simulation, RJV |
| JEL: | D85 L24 C63 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:420&r=net |
| By: | Sapi, Geza; Suleymanova, Irina |
| Abstract: | We develop a duopoly model with advertising supported platforms and analyze incentives of a superior firm to license its advanced technologies to an inferior rival. We highlight the role of two technologies characteristic for media platforms: The technology to produce content and to place advertisements. Licensing incentives are driven solely by indirect network effects arising fromthe aversion of users to advertising. We establish a relationship between licensing incentives and the nature of technology, the decision variable on the advertiser side, and the structure of platforms' revenues. Only the technology to place advertisements is licensed. If users are charged for access, licensing incentives vanish. Licensing increases the advertising intensity, benefits advertisers and harms users. Our model provides a rationale for technology-based cooperations between competing platforms, such as the planned Yahoo-Google advertising agreement in 2008. -- |
| Keywords: | Technology Licensing,Two-Sided Market,Advertising |
| JEL: | L13 L24 L86 M37 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:23&r=net |
| By: | Scott Schuh; Oz Shy; Joanna Stavins; Robert Triest |
| Abstract: | In 2010, the Department of Justice (DOJ) filed a lawsuit against the credit card networks American Express, MasterCard, and Visa for alleged antitrust violations. We evaluate the extent to which the recently proposed settlement between the DOJ and Visa and MasterCard (henceforth, "Proposed Settlement") is likely to achieve its central objective: "…to allow Merchants to attempt to influence the General Purpose [Credit] Card or Form of Payment Customers select by providing choices and information in a competitive market." In word and spirit, the Proposed Settlement represents a significant step toward promoting competition in the credit card market. However, we find that merchants are unlikely to be able to take full advantage of the Proposed Settlement's new freedoms because they currently lack comprehensible and complete information on the full and exact merchant discount fees for their customers' credit cards. We analyze the likely consequences of this information problem, and consider ways in which it could be remedied. We also evaluate the probable welfare consequences of allowing merchants to impose surcharges to reflect the fees associated with the use of payment cards. |
| Keywords: | Credit cards |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbpp:11-4&r=net |
| By: | Kibae Kim (Technical University of Braunschweig); Jorn Altmann (Technology Management, Economics, and Policy Program, College of Engineering, Seoul National University) |
| Abstract: | Service providers that own Web2.0 services allow Internet users not only to access their Web2.0 services but also to create new Web2.0 services (mashups) based on theirs. This creation of mashups generates the Web2.0 service network, in which a node represents a Web2.0 service and a link between two nodes represents a mashup using the two Web2.0 services linked. Since this Web2.0 service network is constructed without the control of a single entity (i.e., it is self-organizing), the network topology of the Web2.0 service network shows the scale-free characteristic. With respect of the weighting of those links, however, there are different approaches. Prior research either considered binary links or links that are weighted by summing up the number of mashups. Since the last approach might overestimate the strength of the link, we calculate the link weights according to Newman’s approach in this paper. Based on this weighted graph of the Web2.0 service network, we investigate the topology of the weighted graph and examine the pattern of Web2.0 service creations. Our results show that the Newman-based weighted graph of the Web2.0 service network shows the characteristics of a scale-free network and a small-world network. |
| Keywords: | Web2.0 services, mashup, network topology analysis, self-organized networks, small-world networks, scale-free networks, complex networks. |
| JEL: | C02 C63 D80 D85 L86 O31 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:snv:dp2009:201178&r=net |
| By: | Gautier, Pieter (VU University Amsterdam); Holzner, Christian (Ifo Institute for Economic Research) |
| Abstract: | When workers send applications to vacancies they create a network. Frictions arise because workers typically do not know where other workers apply to and firms do not know which candidates other firms consider. The first coordination friction affects network formation, while the second coordination friction affects network clearing. We show that those frictions and the wage mechanism are in general not independent. The wage mechanism determines both the distribution of networks that can arise and the number of matches on a given network. Equilibria that exhibit wage dispersion are inefficient in terms of network formation. Under complete recall (firms can go back and forth between all their candidates) only wage mechanisms that allow for ex post Bertrand competition generate the maximum matching on a realized network. |
| Keywords: | efficiency, network clearing, random bipartite network formation, simultaneous search |
| JEL: | D83 D85 E24 J64 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5859&r=net |
| By: | Chang, Chia-ling; Chen, Shu-heng |
| Abstract: | While DSGE models have been widely used by central banks for policy analysis, they seem to have been ineffective in calibrating the models for anticipating financial crises. To bring DSGE models closer to real situations, some of researchers have revised the traditional DSGE models. One of the modified DSGE models is the adaptive belief system model. In this framework, changes in sentiment can be expounded by a Boltzmann-Gibbs distribution, and in addition to externally caused fluctuations endogenous interactions are also considered. Methodologically, heuristic switching models are mesoscopic. For this reason, the social network structure is not described in the adaptive belief system models, even though the network structure is an important factor of interaction. The interaction behavior should ideally be based on some kind of social network structures. Today, the Boltzmann-Gibbs distribution is widely used in economic modeling. However, the question is whether the Boltzmann-Gibbs distribution can be directly applied, without considering the underlying social network structure more seriously. To this day, it seems that few scholars have discussed the relationship between social networks and the Boltzmann-Gibbs distribution. Therefore, this paper proposes a network based ant model and tries to compare the population dynamics in the Boltzmann-Gibbs model with different network structure models applied to stylized DSGE models. We find that both the Boltzmann-Gibbs model and the network-based ant model could generate herding behavior. However, it is difficult to envisage the population dynamics generated by the Boltzmann-Gibbs model and the network-based ant model having the same distribution, particularly in popular empirical network structures such as small world networks and scale-free networks. In addition, our simulation results further suggest that the population dynamics of the Boltzmann-Gibbs model and the circle network ant model can be considered with the same distribution under specific parameters settings. This finding is consistent with the study of thermodynamics, on which the Boltzmann-Gibbs distribution is based, namely, the local interaction. -- |
| Keywords: | DSGE model,network-based ant model,networks,Boltzmann-Gibbs distribution |
| JEL: | C63 D85 E12 E32 E37 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201125&r=net |