nep-net New Economics Papers
on Network Economics
Issue of 2012‒07‒29
ten papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Upward Pricing Pressure in Two-Sided Markets By Affeldt, P.; Filistrucchi, L.; Klein, T.J.
  2. Optimal pricing and quality of academic journals and the ambiguous welfare effects of forced open access: a two-sided model By Mueller-Langer, Frank; Watt, Richard
  3. A network model of financial system resilience By Anand, Kartik; Gai, Prasanna; Kapadia, Sujit; Brennan, Simon; Willison, Matthew
  4. Independent opinions? on the causal foundations of belief formation and jury theorems By Dietrich, Franz; Spiekermann, Kai
  5. Interlocking firm networks in the German knowledge economy. On local networks and global connectivity. By Stefan Luethi; Alain Thierstein; Michael Bentlage
  6. Learning networks of academic spin-offs - A spatial perspective By Mozhdeh Taheri; Marina Van Geenhuizen
  7. Leaderless Covert Networks: A Quantitative Approach By Husslage, B.G.M.; Lindelauf, R.; Hamers, H.J.M.
  8. The Community Structure of R&D Cooperation in Europe. Evidence from a social networks perspective By Michael J. Barber; Manfred M. Fischer; Thomas Scherngell
  9. Structural distortions in the Euro interbank market: The role of 'key players' during the recent market turmoil By Caterina Liberati; Massimiliano Marzo; Paolo Zagaglia; Paola Zappa
  10. The new purposes of the French High-speed rail system in the framework of a centralized network : a substitute to the domestic Air Transport market ? By Pierre Zembri

  1. By: Affeldt, P.; Filistrucchi, L.; Klein, T.J. (Tilburg University, Tilburg Law and Economics Center)
    Abstract: Abstract: Pricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.
    Keywords: Merger evaluation;two-sided markets;network effects;UPP.
    JEL: L13 L40 L82
    Date: 2012
  2. By: Mueller-Langer, Frank; Watt, Richard
    Abstract: We analyse optimal pricing and quality of a monopolistic journal and the optimality of open access in a two-sided model. The predominant aspect of the model that determines the quality levels at which open access is optimal is the nature of the relationship between readers and authors in a journal. In contrast to previous literature, we firstly show that there exist scenarios in which open access is a feature of high-quality journals. Second, we find that removal of copyright (and thus forced open access) decreases journal profits but has ambiguous social welfare effects.
    Keywords: Open access; academic journals; two-sided market; ambiguous welfare effects of removal of copyright
    JEL: L82 L11 O34
    Date: 2012–04–25
  3. By: Anand, Kartik (Technische Universitat Berlin); Gai, Prasanna (Department of Economics, University of Auckland and National University of Singapore, Risk Management Institute); Kapadia, Sujit (Bank of England); Brennan, Simon (Bank of England); Willison, Matthew (Bank of England)
    Abstract: We examine the role of macroeconomic fluctuations, asset market liquidity, and network structure in determining contagion and aggregate losses in a stylised financial system. Systemic instability is explored in a financial network comprising three distinct, but interconnected, sets of agents - domestic banks, overseas banks, and firms. Calibrating the model to advanced country banking sector data, this preliminary model generates broadly sensible aggregate loss distributions which are bimodal in nature. We demonstrate how systemic crises may occur and analyse how our results are influenced by fire-sale externalities and the feedback effects from curtailed lending in the macroeconomy. We also illustrate the resilience of our model financial system to stress scenarios with sharply rising corporate default rates and falling asset prices.
    Keywords: Contagion; financial crises; network models; systemic risk
    JEL: C63 G10 G17 G21
    Date: 2012–07–20
  4. By: Dietrich, Franz; Spiekermann, Kai
    Abstract: It is often claimed that opinions are more likely to be correct if they are held independently by many individuals. But what does it mean to hold independent opinions? To clarify this condition, we distinguish four notions of probabilistic opinion independence. Which notion applies depends on environmental factors such as commonly perceived evidence, or, more formally, on the causal network in which people interact and form their opinions. In a general theorem, we identify conditions on this network that guarantee opinion independence in each sense. Our results have implications for `wisdom of crowds' arguments, as we illustrate by providing old and new jury theorems.
    Keywords: Condorcet Jury Theorem; dependence between voters; probabilistic dependence; causal dependence
    JEL: D7 C0 D8
    Date: 2012–07
  5. By: Stefan Luethi; Alain Thierstein; Michael Bentlage
    Abstract: We assume that the territory of Germany is experiencing a reorganisation of functional division of labour in favour of the knowledge economy. New forms of network economies and functional differentiation between cities and towns can be observed. The increasing importance of emerging network economies has introduced new lines of thinking about space, place and scale that interprets regions as unbounded, relational spaces. The key aim of the paper is to set out a theoretical context and then to empirically investigate the functional polycentric patterns and interlocking networks of Advanced Producer Services (APS) and High-Tech firms on different spatial scales. We start from a conceptual background that brings together the location behaviour of multi-branch multi-location firms with a world city network approach. The analytical building blocks are 338 Functional Urban Areas in Germany, including adjacent agglomerations in Germany’s neighbouring countries. Based on this methodological approach, the paper looks at the extent to which the functional urban hierarchy within the German space economy is associated with different special scales and economic sub-sectors. Interim results provide evidence that the German territory can be regarded as a hierarchically organized space economy in which only few agglomerations establish substantial international connectivities and economic strength.
    Date: 2011–09
  6. By: Mozhdeh Taheri; Marina Van Geenhuizen
    Abstract: Abstract-The importance of new knowledge in innovative activities of firms and the impact of these activities on economic development of regions have been acknowledged in many studies. In particular, universities and firms that are established on university knowledge, spin-off firms, function as nodes and channels through which new knowledge is diffused into the wider (regional) economy. New knowledge is a strategic resource of competitive advantage for young high-tech firms. Of course, many of these firms are based on new technical knowledge but they may lack market and managerial knowledge and skills. An important way of learning on these different aspects is through social networks and business networks, with a local (national) and/or international coverage. Many studies have attempted to understand the characteristics of networks of young high-tech firms, but a detailed picture and understanding of the time and space dimension of models of learning relationships are rare. What may be true is that a well-developed local learning network performs as an important condition for establishing international learning relationships, indicating a stepwise model. The theory of ëborn globalsí indicates, however, international learning from the start of the firm. This paper explores the learning models of university spin-off firms, including some aspects of absorptive capacity, with a focus on various combinations of local and global knowledge networks and changes in these combinations by age of the firms. The analysis draws on a sample of 100 spin-offs from two universities: TU Delft University in the Netherlands and Norwegian University of Science and Technology (NTNU) in Trondheim in Norway. Resource based views and organizational learning theory will be applied to design an analytical model of young high-tech firmsí shaping of learning connections and improving of innovation performance. The empirical part of the paper will include descriptive and explanatory results, the latter derived from correlation analysis.
    Date: 2011–09
  7. By: Husslage, B.G.M.; Lindelauf, R.; Hamers, H.J.M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Lindelauf et al. (2009a) introduced a quantitative approach to investigate optimal structures of covert networks. This approach used an objective function which is based on the secrecy versus information trade-off these organizations face. Sageman (2008) hypothesized that covert networks organize according to leaderless principles, i.e., clear leaders can not be identified. This flat organizational structure is quite robust to destabilization tactics which target the most important persons in a network. There exist several centrality measures to express the importance of persons in a network. The most recent one introduced in the field of covert networks is a game theoretical centrality measure which takes into account both the structure of the covert network, which usually reflects a communication structure, as well as non-network features, which represent individual parameters like financial means or bomb building skills, see Lindelauf et al. (2011). The question we try to answer in this chapter is whether there is a relationship between the quality of a covert network based on their optimality with respect to the trade-off between secrecy and information and the variance of the game theoretic centrality measures of the respective individuals in the network. The leaderless hypothesis seems to suggest that good covert networks do not have a high distinction between centrality of the individuals, i.e., they are leaderless. We investigate this by looking at homogeneous networks and heterogeneous networks in which the links between individuals are weighted. We find that (approximate) optimal networks have low variance in game-theoretic centrality, i.e., we find evidence that supports the leaderless hypothesis. However, if the networks are heterogeneous in the sense that, for instance, certain individuals communicate much more often than others, we find that the variance increases significantly. Finally, we look at the Jemaah Islamiyah 2002 Bali bombing. We find that the operational network used to conduct and to coordinate the bombing not only facilitated both secrecy and efficiency but also adhered to the leaderless principle.
    Keywords: terrorism;network analysis;centrality;game theory.
    JEL: C71
    Date: 2012
  8. By: Michael J. Barber; Manfred M. Fischer; Thomas Scherngell
    Abstract: The focus of this paper is on pre-competitive R&D cooperation across Europe, as captured by R&D joint ventures funded by the European Commission in the time period 2002-2006, within the 5th Framework Program. The cooperations in this Framework Program give rise to a collaborative network, with network nodes representing actors (i.e. organizations including firms, universities, research organizations and public agencies) and network edges representing R&D projects. With this construction, participating actors are linked only through joint projects. We formally describe and analyze the network from a social networks perspective that shifts attention to the detection and analysis of the community structure within the network. Distinct communities within networks may be loosely defined as groups of actors such that there is a higher density of relations within groups than between them. In this study, we attempt to detect communities of actors solely on the basis of the relational structure within the network, and to characterize and differentiate the identified network communities by means of information-theoretic methods, community-specific profiles and the location of their major actors. We expect the results to enrich our picture of the European research area by providing new insights into the global and local structures of R&D cooperation across Europe.
    Date: 2011–09
  9. By: Caterina Liberati; Massimiliano Marzo; Paolo Zagaglia; Paola Zappa
    Abstract: We study the frictions in the patterns of trades in the Euro money market. We characterize the structure of lending relations during the period of recent financial turmoil. We use network-topology method on data from overnight transactions in the Electronic Market for Interbank Deposits (e-Mid) to investigate on two main issues. First, we characterize the division of roles between borrowers and lenders in long-run relations by providing evidence on network formation at a yearly frequency. Second, we identify the 'key players' in the marketplace and study their behaviour. Key players are 'locally-central banks' within a network that lend (or borrow) large volumes to (from) several counterparties, while borrowing (or lending) small volumes from (to) a small number of institutions. Our results are twofold. We show that the aggregate trading patterns in e-Mid are characterized by largely asymmetric relations. This implies a clear division of roles between lenders and borrowers. Second, the key players do not exploit their position of network leaders by imposing opportunistic pricing policies. We find that only a fraction of the networks composed by big players are characterized by interest rates that are statistically different from the average market rate throughout the turmoil period.
    Date: 2012–07
  10. By: Pierre Zembri
    Abstract: The high speed rail network represents now a large part of the rail services, 4 sub-networks being concerned from/to Paris. The interoperability between high-speed trunk lines and the rest of the electrified network permits a large coverage of the French territory : the TGV services network is broader than the real high speed one. From the beginning of high-speed services in France, the main target of the TGV system has been business traffic using the domestic air transport network. The SNCF can be considered as an active player in the Air transport competition, offering low travel times, competitive prices and high capacities. The frequencies can be high between the largest towns : 16 round-trip services between Paris and Marseilles, 21 between Paris and Bordeaux, etc. The development of the TGV network creates new opportunities of competition with Air France and other carriers. That is one of the reasons of the relative weakness of competition within the domestic Air Transport sector. Air France is now planning a progressive downsizing of its domestic services on the lines where the market share of the TGV is growing. We have compared the level of service of the two carriers, according to the TGV average travel time (quite different from the real distance). Our main hypothesis is that Air France adapts its service level and its routes to the supposed state of competition. When most of the flights are oriented towards Orly airport (pure domestic market), the competition is at its advantage. When most of them are oriented to the CDG hub, the competition is over for Air France. The 'price war' has not the same intensity : air fares are higher when HST is not competitive or when the air lines are mostly used for feedering the main hub. The 'area of intense competition' is now between 150 and 300 minutes of HST average travel time, that is more than previously estimated. Most of the domestic and short-haul international routes from Paris, but also from other main towns like Marseilles or Lyon will be shortly concerned...
    Date: 2011–09

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