nep-net New Economics Papers
on Network Economics
Issue of 2012‒07‒14
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Subsidising network technology adoption the case of publishers and E-readers By Matttia De' Grassi Di Pianura
  2. Networks in Economics By Zenou, Yves
  3. The Evolution of R&D Networks By Herbert Dawid; Tim Hellmann
  4. Intermediation in Networks By Jan-Peter Siedlarek
  5. Geographic Access Rules and Investments By Bourreau, Marc; Cambini, Carlo; Hoernig, Steffen
  6. Referral networks and the allocation of talent By Pothier, David
  7. Peer Effects in Program Participation By Dahl, Gordon B.; Loken, Katrine V.; Mogstad, Magne

  1. By: Matttia De' Grassi Di Pianura (CERNA - Centre d'économie industrielle - Mines ParisTech)
    Abstract: To market a new network technology effectively, manufacturers need to understand the structure and size of network effects associated with the product. If consumers' surplus from adoption depends positively on the number of interconnections in the network, early adopters may need to be subsidized until a critical mass is reached. Moreover, in a two-sided market where platforms and complementary contents are constrained to non-negative prices, subsidies can be provided both by platform manufacturers and byproducers of complementary contents. The article presents a model to analyse adoption dynamics with different subsidies and different stand-alone values for technology. The model shows that if the standalone value of technology is limited, subsidies from complementary contents producers may be pivotal to reach the critical mass. Moreover, under given conditions, this type of subsidies can lead to a more efficient adoption, increasing social welfare. In this case, assuming a monopolist platform manufacturer of the technology, complete contracts are needed to reach the Pareto optimal equilibrium.
    Keywords: two-sided markets; network effects; technology adoption; copyright; vertical relations; media economics
    Date: 2012–06–11
  2. By: Zenou, Yves
    Abstract: We provide an overview on networks in economics. We first look at the theoretical aspects of network economics using a game-theoretical approach. We derive some results on games on networks and network formation. We also study what happens when agents choose both links and actions. We then examine how these models can be used to address some applied and empirical-relevant questions by mainly focusing on labor-market networks and crime networks. We provide some empirical evidence on these two types of networks and address some policy implications of the models.
    Keywords: criminal networks; games on networks; labor networks; network formation; Social networks
    JEL: A14 C72 D85
    Date: 2012–06
  3. By: Herbert Dawid (Bielefeld University); Tim Hellmann (Institute of Mathematical Economics, Bielefeld University)
    Abstract: In this paper, we study a standard Cournot model where rms are able to form bilateral collaboration agreements which lower marginal cost. While a static analysis of such a model can be found in Goyal and Joshi [5], we introduce an evolutionary model. Stable networks (in the static sense) exhibit the dominant group architecture and can be characterized with respect to the size of the group. However, in contrast to Goyal and Joshi [5], we nd that the group size of connected rms in stochastically stable networks is generically unique and monotonically decreasing in cost of link formation. Further, there exists a lower bound on the group size of connected rms such that a non-empty network can be stochastically stable.
    Date: 2012–06
  4. By: Jan-Peter Siedlarek (Department of Economics, European University Institute)
    Abstract: This paper studies bargaining and exchange in a networked market with intermediation. Possibilities to trade are restricted through a network of existing relationships and traders bargain over the division of available gains from trade along different feasible routes. Using a stochastic model of bargaining, I characterize stationary equilibrium payoffs as the fixed point of a set of intuitive value function equations and study efficiency and the relationship between network structure and payoffs. In equilibrium, trade is never unduly delayed but it may take place too early and in states where delay would be efficient. The inefficiency arises from a hold-up threat and the inability of bargaining parties credibly to commit to a split in a future period. The model also shows how with competing trade routes as trade frictions go to zero agents that are not essential to a trade opportunity receive a payoff of zero.
    Keywords: Stochastic Games, Bargaining, Random Matching, Middlemen, Network
    JEL: C73 C78 L14
    Date: 2012–05
  5. By: Bourreau, Marc; Cambini, Carlo; Hoernig, Steffen
    Abstract: We analyze competition between vertically integrated infrastructure operators that provide access in different geographical areas. A regulator may impose a uniform access price, set local access rates, or deregulate access locally. We analyze the impact of these alternative regulatory regimes on network investments. While cost-based access leads to both suboptimal rollout and duplication, uniform access prices bring too much duplication. Deregulation in competitive areas can spur investment and lead to social optimum, or call for continued regulatory intervention, depending on the resulting wholesale equilibrium.
    Keywords: geographical access regulation; infrastructure investment; Next generation networks
    JEL: L51 L96
    Date: 2012–06
  6. By: Pothier, David
    Abstract: We study a model of occupational choice where workers must rely on their social contacts to acquire job vacancy information. Contrary to the existing literature, we allow for worker heterogeneity in terms of their idiosyncratic skill-types. In this case, the allocation of talent (the matching of skills to tasks) becomes a welfare-relevant consideration. A worker’s skill-type determines both his relative cost of specialising in different occupations and his productivity on the job. The model shows that relying on word-of-mouth communication for job search generates both positive externalities (due to improved labour market matching) and negative externalities (due to a poor allocation of talent). Which effect dominates depends on the prop- erties of the job search and productivity functions. Taking into account worker heterogeneity shows that the degree of occupational segregation in competitive labour markets is generally not efficient.
    Keywords: Labour Markets; Social Networks
    JEL: J01 Z13 J70
    Date: 2012–07–06
  7. By: Dahl, Gordon B. (University of California, San Diego); Loken, Katrine V. (University of Bergen); Mogstad, Magne (University College London)
    Abstract: The influence of peers could play an important role in the take up of social programs. However, estimating peer effects has proven challenging given the problems of reflection, correlated unobservables, and endogenous group membership. We overcome these identification issues in the context of paid paternity leave in Norway using a regression discontinuity design. Our approach differs from existing literature which attempts to measure peer effects by exploiting random assignment to peer groups; in contrast, we study peer effects in naturally occurring peer groups, but exploit random variation in the "price" of a social program for a subset of individuals. Fathers of children born after April 1, 1993 in Norway were eligible for one month of governmental paid paternity leave, while fathers of children born before this cutoff were not. There is a sharp increase in fathers taking paternity leave immediately after the reform, with take up rising from 3% to 35%. While this quasi-random variation changed the cost of paternity leave for some fathers and not others, it did not directly affect the cost for the father's coworkers or brothers. Therefore, any effect on the brother or the coworker can be attributed to the influence of the peer father in their network. Our key findings on peer effects are four-fold. First, we find strong evidence for substantial peer effects of program participation in both workplace and family networks. Coworkers and brothers are 11 and 15 percentage points, respectively, more likely to take paternity leave if their peer father was induced to take up leave by the reform. Second, the most likely mechanism is information transmission about costs and benefits, including increased knowledge of how an employer will react. Third, there is essential heterogeneity in the size of the peer effect depending on the strength of ties between peers, highlighting the importance of duration, intensity, and frequency of social interactions. Fourth, the estimated peer effect gets amplified over time, with each subsequent birth exhibiting a snowball effect as the original peer father's influence cascades through a firm. Our findings demonstrate that peer effects can lead to long-run equilibrium participation rates which are substantially higher than would otherwise be expected.
    Keywords: social interactions, peer effects, program participation
    JEL: D62 J13 I38
    Date: 2012–06

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