nep-net New Economics Papers
on Network Economics
Issue of 2013‒08‒31
eight papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Cournot-Bertrand profit differential: A Reversal result in network goods duopoly By Rupayan Pal
  2. Optimal Pricing and Quality of Academic Journals and the Ambiguous Welfare Effects of Forced Open Access: A Two-sided Model By Mueller-Langer, Frank; Watt, Richard
  3. "New" Cultural Diversity Policy in the Digital World: Net-neutrality regulation on bottleneck players (Japanese) By TOJO Yoshizumi
  4. Network Centrality Measures and Systemic Risk: An Application to the Turkish Financial Crisis By Tolga Umut Kuzubas; Inci Omercikoglu; Burak Saltoglu
  5. Financial Frictions in Production Networks By Saki Bigio
  6. The Impact of Information Provision on Agglomeration Bonus Performance: An Experimental Study on Local Networks By Banerjee, Simanti; de, Vries Frans; Hanley, Nicholas; van, Soest Daan
  7. Social Networks and Peer Effects at Works By Julie Beugnot; Bernard Fortin; Guy Lacroix; Marie Claire Villeval
  8. Central counterparties and the topology of clearing networks By Galbiati, Marco; Soramaki, Kimmo

  1. By: Rupayan Pal (Indira Gandhi Institute of Development Research)
    Abstract: We revisit the classic profit-ranking of Cournot and Bertrand equilibria and the issue of endogenous choice of a price or a quantity contract, but for a network goods duopoly. We show that, if network externalities are strong (weak), each firm earns higher (lower) profit under Bertrand competition than under Cournot competition. Therefore, unless network externalities are weak, the classic profit-ranking is reversed. When modes of product market competition are endogenously determined, Cournot equilibrium always constitutes the subgame perfect Nash equilibrium (SPNE). However, a prisoners's dilemma type of situation arises and the SPNE is Pareto inefficient, unless network externalities are weak.
    Keywords: Network externalities, Cournot, Bertrand, Profit ranking, Endogenous mode of competition
    JEL: D43 L13
  2. By: Mueller-Langer, Frank; Watt, Richard
    Abstract: We analyse optimal pricing and quality of a monopolistic journal and the optimality of open access in a two-sided model. The predominant aspect of the model that determines the quality levels at which open access is optimal is the nature of the (non-linear) externalities between readers and authors in a journal. We show that there exist scenarios in which open access is a feature of high-quality journals. Besides, we find that the removal of copyright (and thus forced open access) will likely increase both readership and authorship, will decrease journal profits, and may increase social welfare.
    Keywords: Two-sided markets; academic journals; open access; removal of copyright; welfare effects
    JEL: L11 L82 O34
    Date: 2013–08–21
  3. By: TOJO Yoshizumi
    Abstract: As cultural products become digitized and distributed in the Internet protocol (IP) broadband network, traditional cultural diversity regulations and their theoretical basis are being inevitably affected. In an emerging digital world, cultural products are produced, distributed, and consumed through the IP broadband network; an unlimited volume and variety of contents—cultural products as data—are proliferated with low cost; and users are empowered to "pull" together all of their selected contents and become active creators. In this environment, one of the most important regulatory interventions for cultural diversity should be competition policy measures to protect users' free and fair access to the broadband network and contents. <br />bWhile the net-neutrality principle could be a guiding principle in ensuring access rights of users by controlling the dominant players in the IP broadband network, any net-neutrality rule on platform players in the contents/application layers such as Google always has the risk of an over-inclusive regulation. Applying competition law on Google Search also requires careful analysis in determining market power and anticompetitive effect.
    Date: 2013–08
  4. By: Tolga Umut Kuzubas; Inci Omercikoglu; Burak Saltoglu
    Date: 2013–12
  5. By: Saki Bigio (Columbia Business School)
    Abstract: We show that the organization of production among firms in an economy has important implications for the impact of financial frictions. We set up a model in which firms use output of other firms as inputs for their own production. We allow for arbitrary network structures such that aggregate production functions are constant. Therefore, in the absence of frictions these structures are allocatively equivalent. We then provide several examples which illustrate that when firms face liquidity constraints, different input-output structures require vastly di§erent amounts of aggregate liquidity in order to implement identical allocations. This implies that the input-output structure of the economy is an important determinant of its response to a financial shock. Our main result is that financial constraints have a stronger impact on aggregate output when firms are engaged in a larger amount of transactions among themselves. Finally, we calibrate the model to match the input-output matrix of the U.S. economy and use this to explore the extent to which these interrelationships can explain the drop in output during the latest recession.
    Date: 2013
  6. By: Banerjee, Simanti; de, Vries Frans; Hanley, Nicholas; van, Soest Daan
    Abstract: The Agglomeration Bonus (AB) is a mechanism to induce adjacent landowners to spatially coordinate their land use for the delivery of ecosystem services from farmland. This paper uses laboratory experiments to explore the performance of the AB in achieving the socially optimal land management configuration in a local network environment where the information available to subjects varies. The AB poses a coordination problem between two Nash equilibria: a Pareto dominant and a risk dominant equilibrium. The experiments indicate that if subjects are informed about both their direct and indirect neighbors' actions, they are more likely to coordinate on the Pareto dominant equilibrium relative to the case where subjects have information about their direct neighbors' action only. However, the extra information can only delay - and not prevent - the transition to the socially inferior risk dominant Nash equilibrium. In the long run, the AB mechanism may only be partially effective in enhancing delivery of ecosystem services on farming landscapes featuring local networks.
    Keywords: Agglomeration bonus, agri-environment schemes, biodiversity conservation, ecosystem services, information spillovers, Payments for Ecosystem Services, spatial coordination
    Date: 2013–08
  7. By: Julie Beugnot (Department of economics, Université Laval, CIRPÉE); Bernard Fortin (Department of economics, Université Laval, CIRPÉE and CIRANO); Guy Lacroix (Department of economics, Université Laval, CIRPÉE and CIRANO); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: This paper extends the standard work effort model by allowing workers to interact through networks. We investigate experimentally whether peer performances and peer contextual effects influence individual performances. Two types of network are considered. Participants in Recursive networks are paired with participants who played previously in isolation. In Simultaneous networks, participants interact in real-time along an undirected line. Mean peer effects are identified in both cases. Individual performances increase with peer performances in the recursive network. In the simultaneous network, endogenous peer effects vary according to gender : they are large for men but not statistically different from zero for women.
    Keywords: Peer effects, social networks, work effort, piece rate, experiment
    JEL: C91 J16 J24 J31 M52
    Date: 2013
  8. By: Galbiati, Marco (Bank of England); Soramaki, Kimmo (Financial Network Analytics)
    Abstract: Given a network of client-clearer relationships, we define central clearing as a function transforming bilateral trading exposures into centrally cleared exposures. By using numerical simulations, we study how this function is affected by the network's topology, focusing on the exposures of the central counterparty. By assuming that margin requirements are a linear function of exposures, we also draw conclusions as to how the network topology affects aggregate margin requirements.
    Keywords: Central counterparty; CCP; clearing; settlement; network analysis
    JEL: E58 G01 G18
    Date: 2013–08–16

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