nep-net New Economics Papers
on Network Economics
Issue of 2012‒08‒23
eleven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Tariff-Mediated Network Effects versus Strategic Discounting: Evidence from German Mobile Telecommunications By Zucchini, Leon; Claussen, Jörg; Trüg, Moritz
  2. Strategic and economic aspects of network sharing in FTTH/PON architectures By Schneir, Juan Rendon; Xiong, Yupeng
  3. The effect of on-net / off-net differentiation and heterogeneuous consumers on network size in mobile telecommunications : an agent-based aporoach By Muck, Johannes
  4. Is the google platform a two-sided market? By Luchetta, Giacomo
  5. Confirming Information Flows in Networks By Pascal Billand; Christophe Bravard; Jurjen Kamphorst; Sudipta Sarangi
  6. Network structure and the journey to work: An intra-metropolitan analysis By Pavithra Parthasarathi; David Levinson
  7. ATM Fees, Pricing and Consumer Behaviour: An Analysis of ATM Network Reform in Australia By Clare Noone
  8. Clustering, connectivity and hierarchies in the internet global supply chain networks By D'Ignazio, Alessio; Giovannetti, Emanuele
  9. Cross-border policy networks in the trinational region of Basel By WALTHER Olivier; REITEL Bernard
  10. Network Structure and Travel Time Perception By Pavithra Parthasarathi; David Levinson; Hartwig Hochmair
  11. Engaging Small and Medium Enterprises in Production Networks : Firm-level Analysis of Five ASEAN Economies By Ganeshan Wignaraja

  1. By: Zucchini, Leon; Claussen, Jörg; Trüg, Moritz
    Abstract: Mobile telecommunications operators routinely charge subscribers lower prices for calls on their own network than for calls to other networks (on-net discounts). Studies on tariff-mediated network effects suggest this is due to large operators using on-net discounts to damage smaller rivals. Alternatively, research on strategic discounting suggests small operators use on-net discounts to advertise with low on-net prices. We test the relative strength of these effects using data on tariff setting in German mobile telecommunications between 2001 and 2009. We find that large operators are more likely to offer tariffs with on-net discounts but that there is no significant difference in the magnitude of discounts. Our results suggest that tariff-mediated network effects are the main cause for on-net discounts but that there may be merit to both explanations.
    Keywords: Competition; Network effects; Mobile telecommunications; Pricing strategies
    JEL: D22 L11 L96
    Date: 2012–07
  2. By: Schneir, Juan Rendon; Xiong, Yupeng
    Abstract: Due to the high costs associated with the deployment of the passive infrastructure of FTTH networks, operators ponder the possibility of making co-investments based on a network sharing model. This article describes the strategic and economic aspects of network sharing in FTTH/PON architectures. The capabilities of present and future versions of PON architectures and the cost implications of a network sharing model are described. Moreover, the minimum price of the access line necessary to recover the investment is derived. --
    Keywords: FTTH,cost,network sharing,PON
    Date: 2012
  3. By: Muck, Johannes
    Abstract: I explore the effects of on-net / off-net differentiation on network sizes in mobile telecommunications when both rational and non-rational consumers coexist in the market. In particular, three different types of consumers are modeled: (1) fully informed rational (FIR) consumers who are perfectly informed about the true market shares of all networks and choose the network with the lowest expected cost of a call; (2) partly informed rational (PIR) consumers who only observe market shares within a circular sensing field and choose the network with the lowest expected cost of a call based on these observed market shares; and (3) non-rational (NR) consumers who choose the network with the highest market share among their immediate neighbors. Using an agent-based simulation approach and by systematical variation of four key parameters of the model, three key results emerge. First, if the share of FIR consumers is too high, all consumers will eventually join the initially larger network A. Second, if their share in the population is sufficiently large, NR consumers can prevent the growth of clusters of consumers subscribed to network B. Third, if the share of PIR consumers is high, clusters of consumers subscribed to network B can grow, thereby increasing network B's market share, provided that the radius of their circular sensing field is small enough for the cluster size. --
    Date: 2012
  4. By: Luchetta, Giacomo
    Abstract: Probably not. Or, at least, it is a sui generis two-sided market. Unlike other platforms, such as Microsoft Windows operating system, credit cards, or night clubs, where a single transaction is performed via the platform, two different transactions take place on Google. Users look for search results, while advertisers look for users' eyeballs. Whilst operating systems, credit cards, and night clubs would be meaningless if either of the two sides were missing, search engines (like TV or newspapers) can exist under different market configurations. Indeed, in search engines network externalities run only from the number of users to advertisers, and not the other way around. This thesis is supported by the analysis of the existing literature on two-sided markets and the applications carried out so far to the economics of search engines. According to this analysis, a new construction of the relevant market where Google operates is proposed. Google operates as a retailer of eyeballs, or users' attention. In the upstream market, on one side, it buys well-profiled eyeballs from large retailers, i.e. major websites, at a positive price (Traffic Acquisition Costs); on the other side, it buys eyeballs from single consumers in exchange of search services (in-kind payment). Then, it sells well-profiled eyeballs to advertisers in the downstream market. Based on this market construction, the allegations against Google are analysed as alleged violations of competition law along this vertical chain. --
    Date: 2012
  5. By: Pascal Billand (Universite de Lyon, Universite Jean Monnet, Saint-Etienne, CNRS, GATE); Christophe Bravard (Universite de Lyon, Universite Jean Monnet, Saint-Etienne, CNRS, GATE); Jurjen Kamphorst (Erasmus University Rotterdam); Sudipta Sarangi (DIW Berlin and Louisiana State University)
    Abstract: Social networks, be it on the internet or in real life, facilitate information flows. We model this by giving agents incentives to link with others and receive information through those links. In many networks agents will value confirmation of the information they receive from others. Our paper analyzes the impact such a need for confirmation has on the social networks which are formed. We first study the existence of Nash equilibria and then characterize the set of strict Nash networks. Next, we characterize the set of strictly efficient networks and discuss the relationship between strictly efficient networks and strict Nash networks.
    Keywords: connections model; confirmation; two-way flow models
    JEL: C72 D85
    Date: 2012–03–01
  6. By: Pavithra Parthasarathi; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: This paper aims to look at the variation of network structure within a metropolitan area and relate it to observed travel, measured here as the average travel time to work. The Minor Civil Divisions (MCD) within the Twin Cities (Minneapolis, St. Paul) metropolitan area are chosen for this analysis. Quantitative measures, compiled from various sources, are used to capture the various aspects of network structure within each MCD. The variation of these measures within the metropolitan area is analyzed using spatial analyses. The measures of network structure are then related to observed travel using statistical regression models. The results confirm a relation between network structure and travel and point to the importance of understanding the underlying street network structure.
    Keywords: network structure, journey to work, travel time, time perception, travel behavior
    JEL: R41 L91
    Date: 2012
  7. By: Clare Noone (Reserve Bank of Australia)
    Abstract: Automated teller machine (ATM) networks are a key component of payments systems. A number of competing theoretical models have been developed to examine fees associated with ATM transactions. A common feature of these models is that they imply that the elimination of interchange fees will cause a <i>one-for-one</i> increase in direct fees and a <i>one-for-one</i> fall in foreign fees, leaving the price of foreign ATM transactions unchanged in the short run. This prediction is not entirely consistent with recent experience in Australia. Following reform of the Australian ATM network in March 2009 that eliminated interchange fees, the total price of foreign ATM transactions was unchanged but the adjustment in foreign and direct fees was almost twice as large as the eliminated interchange fee. This paper addresses this discrepancy by developing a model of ATM fees that can explain this feature of the Australian experience and also explicitly models various ATM usage costs often ignored in the literature. However, this approach to modelling ATM fees, and the approach taken in the existing literature, cannot explain a striking feature of the Australian experience – the shift in consumer behaviour away from foreign ATM use – and two potential explanations for the observed behaviour are proposed.
    Keywords: ATM fees; network pricing; circular city model; strategic behaviour
    JEL: L11 L13 L84
    Date: 2012–08
  8. By: D'Ignazio, Alessio; Giovannetti, Emanuele
    Abstract: Internet Service Providers compete for customers while exchanging traffic flows to provide a complete, end to end, service to final users. This requires reliable interconnections among competitors that form multiple Global Supply Chain Networks (GSCNs) for the delivery and exchange of Internet traffic. Interconnection decisions form the architecture of the Internet supply chain as they design the rules of the game played by the operators, in terms of reciprocal access pricing and quality and modalities of traffic exchanged. From a provider's point of view, the strategic assessment of its direct interconnection environment is crucial in defining the competitive and complementary elements of its extended GSCN. This paper focuses on the relationship between a provider's connectivity and the degree of mutual connectivity among the operators this provider is connected to.The strategic relevance of this relationship is clearly explained as follows: thebetter connected a provider is, the easier it is to deliver its traffic with high Quality of Service and low costs, while the less interconnected among themselves a provider's neighbours are, the easier it is, for the provider, to exert its bargaining power over them. This bargaining power, of a wellconnected provider over its poorly connected network - neighbours, shows when contracting over quality standards, access pricing and interconnection terms. This paper estimates two separate econometric models showing that the connectivity features of the GSCN display significant differences in network hierarchy and complexity depending on whether they are observed from a European, North American or Rest of the World observation point. --
    Keywords: Internet,Complexity,Global Supply Chain Networks,Clustering,Connectivity
    Date: 2012
  9. By: WALTHER Olivier; REITEL Bernard
    Abstract: This paper provides evidence of how national and linguistic borders affect the structure of policy networks. Our analysis of the Basel metropolitan region located across Switzerland, France and Germany considers the case of cross-border public transportation. Using a social network approach based on 44 actors, we show that national borders play a diminishing role in the formation of policy networks for both information exchange and decision making but still limit interactions between German and French-speaking actors. Local actors develop different brokerage roles according to their country of origin, with Swiss actors acting as coordinator and representative brokers vis-à-vis players located in France and Germany.
    Keywords: policy networks; cross-border metropolitan region; transport policies; social network analysis; Basel; Switzerland; France; Germany
    JEL: F15 F16 J61 R42 R50 R58
    Date: 2012–06
  10. By: Pavithra Parthasarathi; David Levinson; Hartwig Hochmair (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: Road networks have an underlying structure. This structure is defined by the layout, arrangement and the connectivity of the individual network elements, the road segments and their intersections. The differences in network structure exist across and within networks. Travelers perceive and respond to these differences in underlying network structure and complexity. This paper extends the analysis to understanding the underlying theory of why network structure influences travel. Specifically the focus is on the influence of network structure on travel time perception. The hypothesis here is that network design influences traveler perceptions, more specifically the perceptions of travel distance and time. This perception of travel distance and time in turn influences the actual travel by affecting choice of destination, mode, route, and whether to engage in activities.
    Keywords: network structure, time perception, travel behavior
    JEL: R41 L91
    Date: 2012
  11. By: Ganeshan Wignaraja (Asian Development Bank Institute (ADBI))
    Abstract: The Association of Southeast Asian Nations JEL Classification : F10, F23, O14 (ASEAN) small and medium enterprises (SMEs) are under scrutiny for their engagement in production networks following recent emphasis on increasing intra-regional trade, rebalancing, and inclusive growth in Asia. Using a data set covering 5,900 firms in five ASEAN economies at different stages of development, this paper analyses the participation of SMEs in production networks, determinants, and policy implications. It finds that although large firms dominate production network engagement in ASEAN economies, there are signs that SMEs have modestly increased their participation since the late-1990s. This is linked to firm-specific factors (e.g., firm size, foreign ownership, skills, technological capabilities, and access to credit) as well as a supportive business environment. Tackling residual supply-side and policy constraints can further the participation of ASEAN SMEs in production networks.
    Keywords: Small and medium enterprises, SMEs, Production Networks, ASEAN, intra-regional trade, Business Environment
    JEL: F10 F23 O14
    Date: 2012–06

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