nep-net New Economics Papers
on Network Economics
Issue of 2013‒02‒16
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Managerial delegation under network effects By Trishita Bhattacharjee; Rupayan Pal
  2. Income Distribution in Network Markets By Corrado Benassi; Marcella Scrimitore
  3. Determinants of cross-regional R and D collaboration networks: an application of exponential random graph models By Tom Broekel; Matte Hartog
  4. Multilateral Stability and Efficiency of Trade Agreements: A Network Formation Approach By Jorzik, Nathalie; Mueller-Langer, Frank
  5. Bilateralism and Multilateralism: a Network Approach By PAPACCIO, Anna
  6. The Antitrust Analysis of Multi-Sided Platform Businesses By David S. Evans; Richard Schmalensee

  1. By: Trishita Bhattacharjee (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth)
    Abstract: This paper shows that network effects do not have any implication to the nature of the equilibrium strategic managerial delegation under Cournot type quantity competition, unlike as in the case of Bertrand type price competition a la Hoernig (2012). It also shows that delegation of output/price decision to the manager is optimal for the owner even in the case of monopoly in the product market, due to the existence of network effects. The monopolist offers sales-oriented incentive scheme to her manager in equilibrium, if there is network effect.
    Keywords: Strategic delegation, Network effects, Quantity competition, Monopoly
    JEL: D43 L20
    Date: 2013–01
  2. By: Corrado Benassi (Dipartimento di Scienze Economiche, Alma Mater Studiorum - Università di Bologna, Italy; The Rimini Centre for Economic Analysis, Italy); Marcella Scrimitore (Dipartimento di Scienze dell’Economia, Università del Salento, Italy; The Rimini Centre for Economic Analysis, Italy)
    Abstract: We enquiry about the effects of first and second order stochastic dominance shifts of the distribution of the consumers’ willingness to pay, within the standard model of a market with network externalities and hump-shaped demand curve. This issue is analyzed in the polar cases of perfect competition and monopoly. We find that, while under perfect competition both types of distributional changes result in higher output, provided marginal costs are low enough, in the monopoly case the final outcome depends on the way income distribution and the network externality interact in determining market demand elasticity.
    Keywords: Network externalities, income distribution, stochastic dominance
    JEL: D31 D40 L1
    Date: 2013–01
  3. By: Tom Broekel (Institue of Economic and Cultural Geography, Leibnitz-University of Hannover); Matte Hartog (Section of Economic Geography, Faculty of Geosciences, Utrecht University)
    Abstract: This study investigates the usefulness of exponential random graph models (ERGM) to analyze the determinants of cross-regional R and D collaboration networks. Using spatial interaction models, most research on R and D collaboration between regions is constrained to focus on determinants at the node level (e.g. R and D activity of a region) and dyad level (e.g. geographical distance between regions). ERGMs represent a new set of network analysis techniques that have been developed in recent years in mathematical sociology. In contrast to spatial interaction models, ERGMs additionally allow considering determinants at the structural network level while still only requiring cross-sectional network data. The usefulness of ERGMs is illustrated by an empirical study on the structure of the cross-regional R and D collaboration network of the German chemical industry. The empirical results confirm the importance of determinants at all three levels. It is shown that in addition to determinants at the node and dyad level, the structural network level determinant “triadic closure†helps in explaining the structure of the network. That is, regions that are indirectly linked to each other are more likely to be directly linked as well.
    Keywords: cross-regional R and D collaboration, exponential random graph models, network
    JEL: R11 O32 D85
    Date: 2013–02–08
  4. By: Jorzik, Nathalie; Mueller-Langer, Frank
    Abstract: We study the endogenous network formation of bilateral and multilateral trade agreements by means of hypergraphs and introduce the equilibrium concept of multilateral stability. We consider multi-country settings with a firm in each country that produces a homogeneous good and competes as a Cournot oligopolist in each market. Under endogenous tariffs, we find that the existence of a multilateral trade agreement is always necessary for the stability of the trading system and that the formation of preferential trade agreements is always necessary for achieving global free trade. We also find that global free trade is efficient but not necessarily the only multilaterally stable trade equilibrium when countries are symmetric (heterogeneous) in terms of market size. We derive conditions under which such a conflict between overall welfare efficiency and stability occurs.
    Keywords: Preferential trade; multilateral trade agreements; multilateral stability; GATT; network formation
    JEL: F13 F12 D85 C72
    Date: 2013–02
  5. By: PAPACCIO, Anna (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: The deadlock in the Doha Round and the proliferation of regional and bilateral trade agreements has given rise to a new interest in the potential relationship between regionalism and multilateralism. This paper has two main aims. First, the formation of free trade agreements amongst symmetric and asymmetric countries has been studied by means of the network formation theory. Second, we have focused on the connection between bilateralism and multilateralism and we have evaluated the efficiency of the equilibrium configurations. In order to characterize and distinguish between bilateral and multilateral outcomes we have used two different network stability notions, that is, pairwise stability and strong stability. Moreover, from the analysis of pairwise and strong stability we have also obtained insights on the relationship between bilateralism and multilateralism.
    Keywords: Free Trade Agreements; Multilateralism; Network Formation Games
    JEL: D85 F10 F13
    Date: 2013–01–31
  6. By: David S. Evans; Richard Schmalensee
    Abstract: This Chapter provides a survey of the economics literature on multi-sided platforms with particular focus on competition policy issues, including market definition, mergers, monopolization, and coordinated behavior. It provides a survey of the general industrial organization theory of multi-sided platforms and then considers various issues concerning the application of antitrust analysis to multi-sided platform businesses. It shows that it is not possible to know whether standard economic models, often relied on for antitrust analysis, apply to multi-sided platforms without explicitly considering the existence of multiple customer groups with interdependent demand. It summarizes many theoretical and empirical papers that demonstrate that a number of results for single-sided firms, which are the focus of much of the applied antitrust economics literature, do not apply directly to multi-sided platforms.
    JEL: L19 L40
    Date: 2013–02

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