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on Network Economics |
| By: | Peitz, Martin; Rady, Sven; Trepper, Piers |
| Abstract: | We study optimal experimentation by a monopolistic platform in a two-sided mar- ket. The platform provider faces uncertainty about the strength of the externality each side is exerting on the other. It maximizes the expected present value of its profit stream in a continuous-time infinite-horizon framework by setting participation fees or quantities on both sides. We show that a price-setting platform provider sets a fee lower than the myopically optimal level on at least one side of the market, and on both sides if the two sides are approximately symmetric. If the externality that one side exerts is sufficiently well known and weaker than the externality it experiences, the optimal fee on this side exceeds the myopically optimal level. We obtain analogous results for expected prices when the platform provider chooses quantities. While the optimal pol- icy does not admit closed-form representations in general, we identify special cases in which the undiscounted limit of the model can be solved in closed form. |
| Keywords: | Two-Sided Market , Network Effects , Monopoly Experimentation , Bayesian Learning , Optimal Control |
| JEL: | D42 D83 L12 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:mnh:wpaper:32932&r=net |
| By: | Mohamed Belhaj (Centrale Marseille, (Aix-Marseille School of Economics), CNRS and EHESS); Sebastian Bervoets (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS); Frédéric Deroïan (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS) |
| Abstract: | We consider agents playing a linear network game with strategic complementarities. We analyse the problem of a policy maker who can change the structure of the network in order to increase the aggregate efforts of the individuals and/or the sum of their utilities, given that the number of links of the network has to remain fixed. We identify some link reallocations that guarantee an improvement of aggregate efforts and/or aggregate utilities. With this comparative statics exercise, we then prove that the networks maximising both aggregate outcomes (efforts and utilities) belong to the class of Nested-Split Graphs. |
| Keywords: | Network, Linear Interaction, Bonacich Centralities, Strategic Complementarity, Nested Split Graphs. |
| JEL: | C72 D85 |
| Date: | 2013–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1309&r=net |
| By: | Antonio Cabrales; Piero Gottardo; Fernando Vega-Redondo |
| Abstract: | The aim of this paper is to investigate how the capacity of an economic system to absorb shocks depends on the specific pattern of interconnections established among financial firms. The key trade-off at work is between the risk-sharing gains enjoyed by firms when they become more interconnected and the large-scale costs resulting from an increased risk exposure. We focus on two dimensions of the network structure: the size of the (disjoint) components into which the network is divided, and the "relative density" of connections within each component. We find that when the distribution of the shocks displays "fat" tails extreme segmentation is optimal, while minimal segmentation and high density are optimal when the distribution exhibits "thin" tails. For other, less regular distributions intermediate degrees of segmentation and sparser connections are also optimal. We also find that there is typically a conflict between efficiency and pairwise stability, due to a "size externality" that is not internalized by firms who belong to components that have reached an individually optimal size. Finally, optimality requires perfect assortativity for firms in a component. |
| Keywords: | Firm networks, Contagion, Risk Sharing |
| JEL: | D85 C72 G21 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2013/01&r=net |
| By: | Muhamed Kudic; Katja Guhr |
| Abstract: | We study how firm innovativeness is related to individual cooperation events and the structure and dynamics of firms’ ego-networks employing a unique panel dataset for the full population of 233 German laser source manufactures between 1990 and 2010. Firm innovativeness is measured by yearly patent applications as well as patent grants with a two year time-lag. Network measures are calculated on the basis of 570 knowledge-related publicly funded R&D alliances. Estimation results from a panel data count model with fixed effects are suggestive of direct innovation effects due to individual cooperation events, but only as long as structural ego-network characteristics are neglected. Innovativeness is robustly related to ego-network size and ego-network brokerage whereas ego-network density reveals some surprising results. |
| Keywords: | R&D cooperation, ego-networks, firm innovativeness |
| JEL: | L25 O32 D85 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:6-13&r=net |
| By: | Daniel Fricke; Karl Finger; Thomas Lux |
| Abstract: | Networks constructed from credit relationships in the interbank market have been found to exhibit disassortative mixing together with a scale-free degree distribution, in contrast to most social networks that are assortative and not necessarily scale-free. This provokes the question whether generating mechanisms for scale-free networks have enough flexibility to generate both assortative and disassortative structures depending on their parametrization. Using Monte-Carlo simulations, we show that scale-free networks with a small tail exponent tend to be disassortative. However, the simulations indicate also that the level of disassortativity is sensitive to changes in the scaling exponent and the density. A given combination of disassortativity, scaling of the degree distribution, and density in an empirical data set, might be hard or impossible to obtain from any of the known generating mechanisms for scale-free networks |
| Keywords: | Interbank Market, Network Models, Scale-Free Networks, Powerlaw |
| JEL: | G21 G01 E42 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1830&r=net |
| By: | Sina Önder, Ali (Uppsala Center for Fiscal Studies); Terviö, Marko (Aalto University and HECER) |
| Abstract: | We investigate divisions within the citation network in economics using citation data between 1990 and 2010. We consider all partitions of top institutions into two equal-sized clusters, and pick the one that minimizes cross-cluster citations. The strongest division is much stronger than could be expected to be found under idiosyncratic citation patterns, and is consistent with the reputed freshwater/saltwater division in macroeconomics. The division is stable over time, but varies across the fields of economics. |
| Keywords: | citations; clustering; influence; schools of thought |
| JEL: | A11 D85 I23 |
| Date: | 2013–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2013_003&r=net |