nep-net New Economics Papers
on Network Economics
Issue of 2013‒05‒22
five papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Comparative Advertising in Markets with Network Externalities By Maria Alipranti; Emmanuel Petrakis
  2. Competitive Equilibrium from Equal Incomes for Tow-Sided Matching By Yinghua He; Antonio Miralles; Jianye Yan
  3. Price Regulation and the Financing of Universal Services in Network Industries By Christian Jaag
  4. Design and operating of gas transmission networks. By Babonneau, Frédéric
  5. MNC affiliation, knowledge bases and involvement in global innovation networks By J. Herstad , Sverre; Ebersberger , Bernd; Asheim, Bjørn

  1. By: Maria Alipranti (University of Crete); Emmanuel Petrakis (Department of Economics, University of Crete, Greece)
    Abstract: The present paper investigates the firms' incentives to invest in comparative advertising in a spatially differentiated duopoly market characterized by network externalities. We show that for a wide range of locations, determined by the interaction between the transportation cost, the network effects and the effectiveness of advertising, firms have incentives to invest in comparative advertising with their investment levels to be positively related to the transportation cost and negatively related to the network effects. Further, comparing the equilibrium results of our model with the benchmark case without advertising activities and the case without network externalities, we show that the firms' location distance increases in the presence of network externalities, while it decreases in the presence of comparative advertising.
    Keywords: Comparative Advertising, Network Effects, Location
    JEL: L13 D43 M37
    Date: 2012–08–29
  2. By: Yinghua He; Antonio Miralles; Jianye Yan
    Abstract: Using the assignment of students to schools as our leading example, we study many-to-one two-sided matching markets without transfers. Students are endowed with cardinal preferences and schools with ordinal ones, while preferences of both sides need not be strict. Using the idea of a competitive equilibrium from equal incomes (CEEI, Hylland and Zeckhauser (1979)), we propose a new mechanism, the Generalized CEEI, in which students face different prices depending on how schools rank them. It always produces fair (justified-envy-free) and ex ante efficient random assignments and stable deterministic ones with respect to stated preferences. Moreover, if a group of students are top ranked by all schools, the G-CEEI random assignment is ex ante weakly efficient with respect to students’ welfare. We show that each student’s incentive to misreport vanishes when the market becomes large, given all others are truthful. The mechanism is particularly relevant to school choice since schools’ priority orderings can be considered as their ordinal preferences. More importantly, in settings where agents have similar ordinal preferences, the mechanism’s explicit use of cardinal preferences may significantly improve efficiency. We also discuss its application in school choice with affirmative action such as group-specific quotas and in one-sided matching.
    Keywords: two-sided matching, weak preferences, school choice, efficiency, fairness, stability, incentive compatibility, competitive equilibrium from equal incomes
    JEL: C78 D82 I29
    Date: 2012–12
  3. By: Christian Jaag
    Abstract: The financing of universal service in network industries has traditionally relied on granting the universal service provider (USP) a reserved area. Liberalization policies promoting competitive entry put the traditional universal service at risk. Consequently, there is an increased interest in knowing the cost of the universal service obligation (USO) and an intensive policy debate about its financing. This paper explores the complementary roles of price regulation and universal service regulation in network industries. It analyzes compensation for the universal service provider by public finances and a USO fund. As long as the USP enjoys market power, also price regulation may serve as a means to finance universal services. This implies allowing for price increases to compensate for the net cost of the USO. It releases competing operators or the general budget from contributing to the financing of the USO but results in distorted pricing and reduced overall welfare due to inefficient entry. Generally, the analysis shows that current practices of costing and financing universal services may result in unintended market distortions. The paper quantifies these effects and demonstrates how such distortions can be avoided.
    Keywords: Universal service obligation, Postal sector, Net cost, Price regulation
    JEL: L51
    Date: 2013–04
  4. By: Babonneau, Frédéric
    Abstract: Problems dealing with the design and operations of gas transmission networks are challenging. The standard approaches lead to a difficult nonlinear nonconvex optimization problem. To get around this difficulty, we use a minimum energy principle to define stationary flows in the network. This solution minimizes the total energy dissipated in the system. We extend the minimization process to the choice of suitable diameters on the reinforcing arcs and add a constraint that limits the monetary cost of investment and of purchase and delivery of gas. Under a suitable and acceptable approximation of the structure of the investment cost function, the new problem turns out to be convex and tractable even for very large networks.
    Date: 2012
  5. By: J. Herstad , Sverre (Nordic Institute for Studies in Innovation, Research and Education (NIFU), Oslo; CIRCLE, Lund University); Ebersberger , Bernd (MCI Management Center Innsbruck,Austria); Asheim, Bjørn (CIRCLE, Lund University)
    Abstract: Innovation collaboration is subjected to partner search and selection constraints. These constraints are reinforced by geographical distance, and mediated by privileged information accessed through pre-existing formal and informal ties to foreign business contexts. Multinational corporations may therefore influence the collaborative linkages maintained by their affiliates abroad, outside the group network. This paper shows that the sensitivity of foreign collaboration to resources provided by the parent group is dependent on whether affiliates of the multinational are engaged in developing cross-disciplinary, application-specific technological knowledge with a strong tacit content (e.g. systems engineering), knowledge with a strong aesthetic of cultural content (e.g. media or fashion) or knowledge dominated by specific scientific disciplines (e.g. biotechnology).
    Keywords: Multinational corporations; industrial knowledge bases; innovation collaboration; globalization
    JEL: F23 L24 O32
    Date: 2013–03–03

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