nep-net New Economics Papers
on Network Economics
Issue of 2013‒03‒09
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Piracy in a two-sided software market By Rasch, Alexander; Wenzel, Tobias
  2. Guided through the `Red tape'? Information sharing and foreign direct investment. By Balsvik, Ragnhild; Skaldebø, Linde Tøndel
  3. La gratuité peut-elle avoir des effets anticoncurrentiels ? Une perspective d'économie industrielle sur le cas Google By Estelle Malavolti; Frederic Marty
  4. Impact of the ASEAN Economic Community on ASEAN Production Networks By Cheewatrakoolpong, Kornkarun; Sabhasri, Chayodom; Bunditwattanawong, Nath

  1. By: Rasch, Alexander; Wenzel, Tobias
    Abstract: This paper studies the impact of software piracy in a two-sidedmarket setting. Software platforms attract developers and users to maximize their profits. The equilibrium price structure is affected by piracy: license fees to developers are higher with more software protection but the impact on user prices is ambiguous. A conflict between platforms and software developers over software protection may arise: whereas one side benefits from better protection, the other party loses out. Under platform compatibility, this conflict is no longer present. --
    Keywords: developer,piracy,platform,software,two-sided markets
    JEL: L11 L86
    Date: 2013
  2. By: Balsvik, Ragnhild (Dept. of Economics, Norwegian School of Economics and Business Administration); Skaldebø, Linde Tøndel (Chr. Michelsen Institute)
    Abstract: What drives the observed tendency of new FDI, other things equal, to be attracted to locations where many other foreign investors are located? One explanation in the literature on FDI location is that expected bene ts from agglomeration externalities make rms want to locate in agglomerated regions. Alternatively, potential investors get information about conditions in a host from rms in their own business network that already have experience from that country. We study how Norwegian FDI location choice depends on previous Norwegian presence, using information about institutional quality to separate the impact of information sharing from agglomeration externalities. The impact of previous Norwegian investors is larger in countries with low institutional quality. We interpret this as consistent with the presence of information sharing among Norwegian investors.
    Keywords: FDI; location choice; networks; information; agglomeration.
    JEL: D80 F23
    Date: 2013–02–18
  3. By: Estelle Malavolti (Toulouse School of economics enac-Leea); Frederic Marty (Ofce sciences-po)
    Abstract: Firms operating in two-sided markets have to integrate in their optimal pricing structure the existence of indirect externalities across groups of consumers. Beyond direct externalities network effects,such markets are characterized by the increasing value of the platform for the users on one side with the number on the other side. As for Internet search platforms such as Google, their value for advertisers depends on the number of users and especially of precisely targeted ones. As a consequence, the optimal price structure in a two-sided market cannot be symmetrical. In other words, the price structure is not neutral and has to take into account such linkages between these two groups of users. From an economic point of view, it may make sense to impose no charge for the group that generates the most valuable externalities. With antitrust inquiries, such specificity imposes to consider simultaneously both sides of the markets. Otherwise, the risk of false negative decisions may arise. On one side the pricing strategy might be interpreted as a predatory practice and on the other side as an exploitative abuse. As the number and the loyalty of users on one side is an essential input to competition between platforms on the other side, it might be rational to subsidize them by acquiring exclusive rights on some valuable contents and to implement bundling and tying strategies. The main risk lies in some market foreclosure. The market might evolve towards vertically integrated ecosystems, e.g. a silos model of competition. Furthermore, competition authorities have to define a sound economics-based theory of harm to disentangle practices that reduce consumer welfare (by increasing switching costs) from ones that might be finally welfare-enhancing. The issue of remedies arises inexorably from this point. Our paper sheds light on these industrial economics and competition law issues.
    Keywords: Two-sided markets, Internet search markets, exclusionary practices, market foreclosure, remedies
    JEL: K21 L12 L41 L86
    Date: 2013–01
  4. By: Cheewatrakoolpong, Kornkarun (Asian Development Bank Institute); Sabhasri, Chayodom (Asian Development Bank Institute); Bunditwattanawong, Nath (Asian Development Bank Institute)
    Abstract: Empirical evidence suggests that the emergence of international production networks in East Asia results from market-driven forces such as vertical specialization and higher production costs in the home countries and institutional-led reasons such as free trade agreements. This paper examines two industries—autos and auto parts, and hard disk drives (HDDs)—to understand international production networks. The study examines the structure of vertical intra-industry trade among East Asian countries, especially members of the Association of Southeast Asian Nations, depicts international production sharing in the selected industries, namely HDD, and automobiles and automotive parts, in the region. The study also points out the importance of the People’s Republic of China and Thailand as assembly bases. It concludes that investment promotion policies contributed more to the emergence of international production networks than free trade agreements.
    Keywords: asean; production networks; asean economic community; east asia; vertical specialization
    JEL: F14
    Date: 2013–02–22

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