nep-net New Economics Papers
on Network Economics
Issue of 2013‒04‒20
eight 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. Networks and Favor Exchange Norms under Stochastic Costs By Seungmoon Choi; Virginie Masson; Angus Moore; Mandar Oak
  3. Network! Network! Network! How global technology start-ups access modern business ecosystems By Tahvanainen, Antti-Jussi; Steinert, Martin
  4. The evolution of innovation networks: The case of a German automotive network By Buchmann, Tobias; Pyka, Andreas
  5. Net Neutrality is Imperfect and Should Remain So! By Nicolas Curien
  6. Measuring the default risk of sovereign debt from the perspective of network By Hongwei Chuang; Hwai-Chung Ho
  7. Domino Effects when Banks Hoard Liquidity: The French network. By Fourel, V.; Héam, J-C.; Salakhova, D.; Tavolaro, S.
  8. Unveiling Global Innovation Networks By Leonardo Costa Ribeiro; Glenda Kruss; Gustavo Britto; Ricardo Machado Ruiz; Américo Tristão Bernardes; Eduardo da Motta e Albuquerque

  1. By: Zucchini, Leon; Claussen, Jörg; Trüg, Moritz
    Abstract: Mobile telecommunication 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 there is no consistently significant difference in the magnitude of discounts. Our results suggest that tariff-mediated network effects are the main cause of on-net discounts.
    Keywords: Competition; Network effects; Mobile telecommunications; Pricing strategies
    JEL: D22 L11 L96
    Date: 2013–04
  2. By: Seungmoon Choi (School of Economics, University of Adelaide); Virginie Masson (School of Economics, University of Adelaide); Angus Moore; Mandar Oak (School of Economics, University of Adelaide)
    Abstract: We develop a model of favor exchange in a network setting where the cost of performing favors is stochastic. For any given favor exchange norm, we allow for the endogenous determination of the network structure via a link deletion game. We characterize the set of stable as well as equilibrium systems and show that these sets are identical. The most efficient network topology and favor exchange convention are generically shown to be not supported as equilibrium of the link deletion game. Our model provides a useful framework for understanding the topology of favor exchange networks. While the model exhibits positive externalities, its properties differ from the "information transmission" model à la Jackson and Wolinsky, as evidenced by the emergence of regular networks as opposed to star networks as stable and efficient network structures.
    JEL: D85 C78 L14 Z13
    Date: 2013–04
  3. By: Tahvanainen, Antti-Jussi; Steinert, Martin
    Abstract: to connect to critical stakeholders and, thereby, to integrate into foreign business ecosystems. Reverting to explorative, inductive methodology, the study contributes to the existing body of knowledge by approaching networking from a rare angle; networking as practice. The study examines (i) the precepts and principles that direct the start-ups’ networking efforts, (ii) the practices they employ to identify relevant partners and establish connections to them, (iii) the practices they make use of in the interface of newly established connections to sway and commit the respective partners to their cause and network, and finally (iv), the practices that offshore governmental agency nodes apply to help start-ups assimilate to foreign local ecosystems. We found that firms need to embrace and learn how to exploit serendipitous networking opportunities to gain access to stakeholders that purely ansoffian planning approaches could never uncover. The exploitation of serendipity necessitates flexibility with regard to the start-ups’ existing product or service concepts, strategies and business plans because in the serendipitous mode these are often re- and co-designed with newly encountered stakeholders. Many of the actual networking practices were found to have evolved together with the progress of other dominant megatrends such as the spread and acceptance of social and other digital media. Such progress seems to have endogenously affected some of the conventional cultural tenets of networking, helping to bypass hierarchical gatekeepers in organizations, for instance. In addition, the diffusion and acceptance of more content- and context-rich communication techniques such as social and mobile video, prototyping and story-telling have made pitching a proposal faster, more holistic, experiential and interactive. We further found that offshore governmental agency nodes can play a decisive role in accelerating and facilitating the integration of foreign newcomers into a local ecosystem. Important prerequisite for the capability to provide such services is a respected and established status within the ecosystem, a vast, cross-sectoral network, and professional employees with hands-on industrial experience in the respective ecosystem.
    Keywords: networking, practice, network access, entrepreneurship, ecosystem, globalization
    Date: 2013
  4. By: Buchmann, Tobias; Pyka, Andreas
    Abstract: In this paper we outline a conceptual framework for depicting network development patterns of interfirm innovation networks and for analyzing the dynamic evolution of an R&D network in the German automotive industry. We test the drivers of evolutionary change processes of a network which is based on subsidised R&D projects in the 10 year period between 1998 and 2007. For this purpose a stochastic actor-based model is applied to estimate the impact of various drivers of network change. We test hypotheses in the innovation and evolutionary economics framework and show that structural positions of firms as well as actor covariates and dyadic covariates are influential determinants of network evolution. --
    Date: 2013
  5. By: Nicolas Curien
    Abstract: Network neutrality is often mistakenly assimilated with the non-discrimination of Internet usage. Although this rough view is acceptable at first sight, as far as blocking of content or clearly anti-competitive discrimination are concerned, it becomes confusing at second sight, when the efficiency of traffic management, on the supply side, or the differentiation of consumers’ requests, on the demand side, are considered. A neutrality principle ignoring traffic efficiency and demand differentiation through enforcing a strict homogeneity in the treatment of data packets on the network would prove inappropriate as it would downgrade the quality of service while not meeting consumers’ needs.In order to clarify the on-going debates, an unambiguous and formal definition of the concept of neutrality is required. In this contribution, a tentative definition is proposed, based on the economic principle of efficiency. Perfect neutrality is first shown as being efficient, i.e. welfare maximizing, in an ideal context C*. Then, by definition, the efficient network design in some real context C distinct from C* is called “C-imperfect neutralityâ€. Depending on the specification of context C, neutrality may involve some form of efficient discrimination and becomes a flexible concept as it translates into different settings in various technological or political environments and as it may change overtime in a given environment.This approach of “the most efficient imperfection†provides an adequate framework to discuss the main net neutrality issues presently at stake in the North-American and European scenes. Among those, we shall emphasize traffic management, segmentation of demand, funding of the next generation access networks, interference of governmental policies with networks’ operations, regulation of neutrality.
    Keywords: Net-neutrality, internet policy, economic efficiency, imperfect competition, regulation
    Date: 2013–03
  6. By: Hongwei Chuang; Hwai-Chung Ho
    Abstract: Recently, there has been a growing interest in network research, especially in these fields of biology, computer science, and sociology. It is natural to address complex financial issues such as the European sovereign debt crisis from the perspective of network. In this article, we construct a network model according to the debt--credit relations instead of using the conventional methodology to measure the default risk. Based on the model, a risk index is examined using the quarterly report of consolidated foreign claims from the Bank for International Settlements (BIS) and debt/GDP ratios among these reporting countries. The empirical results show that this index can help the regulators and practitioners not only to determine the status of interconnectivity but also to point out the degree of the sovereign debt default risk. Our approach sheds new light on the investigation of quantifying the systemic risk.
    Date: 2013–04
  7. By: Fourel, V.; Héam, J-C.; Salakhova, D.; Tavolaro, S.
    Abstract: We investigate the consequences of banks' liquidity hoarding behavior for the stability of the financial system proposing a new model of banking contagion through two channels, bilateral exposures and funding shortage. Inspired by the key role of liquidity hoarding in the 2007-2009 financial crisis, we incorporate banks' hoarding behavior in a standard Iterative Default Cascade algorithm to compute the propagation of a common market shock through a banking system. In addition to potential solvency contagion, a market shock leads to banks’ liquidity hoarding that may generate problems of short-term funding for other banks. As an empirical exercise, we apply this model to the French banking system. Relying on data on bank’s bilateral exposures collected by the French Prudential Supervisor Authority, the French banking sector appears resilient to the combination of an initial market shock (losses on marked-to-market assets) and of the resulting solvency and liquidity contagion. Gauging the relative weights in the total loss of the various factors, the model sheds light on the complexity of liquidity hoarding effects.
    Keywords: Liquidity hoarding, solvency and funding contagion, financial networks, systemic risk.
    JEL: G01 G21 G28
    Date: 2013
  8. By: Leonardo Costa Ribeiro (INPI); Glenda Kruss (HSRC South Africa); Gustavo Britto (Cedeplar-UFMG); Ricardo Machado Ruiz (Cedeplar-UFMG); Américo Tristão Bernardes (UFOP); Eduardo da Motta e Albuquerque (Cedeplar-UFMG)
    Abstract: The role of multinational enterprises in the internationalization of production has been recognized and studied from several points of view. We believe that multinational firms have a similar role in shaping flows of knowledge, technology, and scientific research. Therefore, multinational firms, science and technology could be linked in a way that allows us to identify Global Innovation Networks (GIN), another and important feature of the internationalization of capital. The goal of this paper is to develop a methodology to identify GINs, based on previous work on patents and their citations of scientific papers, which was adapted to track GINs. That is, the main indicators measure interactions between firms and universities. We argue that the links between patenting firms and the authors of cited papers establish connections that allow the identification of several types of GINs. A case study of IBM is presented in this paper, as a well-known leading patent firm with several papers cited in its patents. It may provide an excellent case to demonstrate how the selected indicators describe the knowledge flows between firms and research institutions. The conclusion shows that other GINs can be identified applying the same methodology.
    Keywords: multinational firms, complex networks; diffusion; patents; innovation; technological change
    Date: 2012–10

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