nep-net New Economics Papers
on Network Economics
Issue of 2013‒07‒20
three papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Managerial delegation in monopoly under network effects By Trishita Bhattacharjee; Rupayan Pal
  2. Price vs. Quantity in duopoly with strategic delegation: Role of network externalities By Trishita Bhattacharjee; Rupayan Pal
  3. Network Formation: R&D Cooperation Propensity and Timing Among German Laser Source Manufacturers By Muhamed Kudic

  1. By: Trishita Bhattacharjee (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth)
    Abstract: This paper examines the possibility of emergence of incentive equilibrium in the case of monopoly, without relying on agency theory based arguments. It shows that, when there is network effect of consumption, it is optimal for a monopolist to offer sales-oriented incentive scheme to her manager. The extent of sales-orientation of the optimal incentive scheme is higher in the case of stronger network effect. It also shows that both the monopolist and consumers are better off under managerial delegation than in case of no delegation, unlike as in the case of usual oligopoly without network effect.
    Keywords: Incentive equilibrium, Managerial delegation, Monopoly, Network effects
    JEL: D42 L20 L12
    Date: 2013–05
  2. By: Trishita Bhattacharjee (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development Research)
    Abstract: This paper examines the implications of network externalities on equilibrium outcomes in a differentiated products duopoly under strategic managerial delegation through relative performance based incentive contracts. It shows that Miller and Pazgal (2001)'s equivalence result does not go through in the presence of network externalities. Instead, Singh and Vives (1984)'s rankings of equilibrium outcomes under Cournot and Bertrand hold true under relative performance based delegation contracts as well, if there are network externalities. However, when firms can choose whether to compete in price or in quantity, there are two pure strategy Nash equilibria and one mixed strategy Nash equilibrium. Interestingly, in pure strategy Nash equilibria asymmetric competition occurs, where a firm competes in price and its rival firm competes in quantity. Further, the mixed strategy Nash equilibrium probability of a firm to compete in terms of price increases with the strength of network effects and is always greater than the probability to compete in terms of price.
    Keywords: Symmetric competition, Price competition, Network externalities, Quantity competition, Relative performance contract, Strategic delegation
    JEL: D43 L22 L13 D21
    Date: 2013–05
  3. By: Muhamed Kudic
    Abstract: Empirical evidence on the evolution of innovation networks within high-tech industries is still scant. We investigate network formation processes by analyzing the timing of firms to enter R&D cooperations, using data on laser source manufacturers in Germany, 1990-2010. Network measures are constructed from a unique industry database that allows us to track both the formation and the termination of ties. Regression results reveal that a firm's knowledge endowment (and cooperation experience) shortens the duration to first (and consecutive) cooperation events. The previous occupation of strategic network positions is closely related to the establishment of further R&D cooperations at a swift pace. Geographic co-location produces mixed results in our analysis.
    JEL: O32 C41 D85
    Date: 2013–07

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