2012-04-17 papers

on Network Economics

Issue of 2012–04–17
two papers chosen by
Alfonso Rosa García, Universidad de Murcia

Competitive Targeted Marketing By Hang-Hyun Jo; Jeoung-Yoo Kim
A New Outside Option Value for Networks: The Kappa-Value – Measuring Distribution of Power of Political Agreements By Julia Belau

By:	Hang-Hyun Jo; Jeoung-Yoo Kim
Abstract:	In this paper, we consider two firms diffusing incompatible technologies and their decision of consumer targeting. The technology adoption is made in two steps. First, once the firms sell their products to their respective targeted consumer, the technology is diffused successively by word-of-mouth communication from the initial consumer to other consumers linked along the network. Then, in the second step, each consumer imitates the technology distribution keeps evolving until it reaches the long-run steady state. We demonstrate that the early entrant chooses the minmax location when firms are myopic in the sense that they do not take the imitation possibility into account. If firms consider the possibility of imitation, the best target will tend towards a hub, although the minmax principle in general keeps valid in the sense that it should be the minmax location after considering imitation.
Date:	2012–03
URL:	https://d.repec.org/n?u=RePEc:dpr:wpaper:0834

A New Outside Option Value for Networks: The Kappa-Value – Measuring Distribution of Power of Political Agreements

By:	Julia Belau
Abstract:	In an economic or social situation where agents have to group in order to achieve common goals, how can we calculate the coalitional rents of the agents arising from the coalition formation? Once we have formalized the situation via a TU-game and a network describing the economic structure, we can apply different allocation rules to assign the coalitional rents to the agents. We specifically analyze situations where parties with a specific vote distribution in a parliament have to build agreements in order to reach some required quorum. In this situation, we want to measure the (relative) distribution of power. We analyze the allocation rules called Position value (Meessen (1988) and Borm et al. (1992)) and graph-chi-value (Casajus (2009)). Applying the generalized framework (Gómez et al. (2008)), a framework where coalitions are not established yet, we fi nd that the graph-chi-value does not differ for networks referring to the same coalition while the Position value takes into account the specific role of an agent within the network, i.e. the communication path. We define and characterize a new outside option sensitive value, the Kappa-value, which takes into account both outside options and the role of an agent within the network.
Keywords:	Cooperative games; graph-restricted games; networks; position value; outside options; minimal winning coalitions
JEL:	C71 D85 H10
Date:	2012–04
URL:	https://d.repec.org/n?u=RePEc:rwi:repape:0326

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