nep-net New Economics Papers
on Network Economics
Issue of 2013‒09‒24
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Networks, hackers, and nonprotected consumers By Bartholomae, Florian W.
  2. Network Neutrality, Access to Content and Online Advertising By Anna D’Annunzio; Antonio Russo
  3. Assignment Games with Externalities By Gudmundsson, Jens; Habis, Helga
  4. Stability analysis of a model for the market dynamics of a smart grid By F. Sorrentino; D. Tolic; R. Fierro; J. R. Gordon; A. Mammoli
  5. Collective risk aversion. By Jouini, Elyès; Napp, Clotilde; Nocetti, Diego
  6. The Role of Language in Corporate Governance: The Case of Board Internationalization By Piekkari, Rebecca; Oxelheim, Lars; Randøy, Trond

  1. By: Bartholomae, Florian W.
    Abstract: In this paper a network model is developed in which three players sequentially choose their strategies. In the first stage, a profit-maximizing network firm chooses the price and thus the size of the network. In the second stage the consumers decide whether to join in the network or not. In the last stage a hacker has the opportunity to hack the network and cause damage to the consumer. The success of hacking is based on the protection of the customers. Whereas in the first part of the paper this is given exogenously it is endogenized later on. In an extension, the utility of the hacker as well as the consumers includes psychological costs, thus allowing some further insights. Finally, policy implications are given implying better international cooperation of the law enforcement authorities. --
    Keywords: hacking,network size,cloud computing,nonprotected consumers
    JEL: D03 L1 L86 K4
    Date: 2013
  2. By: Anna D’Annunzio; Antonio Russo
    Abstract: We investigate possible effects of network neutrality regulation on the distribution of content in the Internet. We model a two-sided market, where consumers and advertisers interact through Content Providers (CPs), and CPs and consumers through Internet Service Providers (ISPs). Multiple impressions of an ad on a consumer are partially wasteful. Thus, equilibrium ad rates decrease with the number of CPs consumers can browse. Under network neutrality, CPs can connect to any ISP for free, while in the unregulated regime they have to pay a (non-discriminatory) access fee set by the ISP.We show that universal distribution of content is always an equilibrium with net neutrality regulation. Instead, in the unregulated regime, ISPs can use access fees to rule out universal distribution when it is not profitable, i.e. when repeated impressions of an ad rapidly lose value and consumers care for content availability to a small extent. We also find that the unregulated regime is never superior to net neutrality from a welfare point of view. Consumer and advertiser surplus are weakly higher under net neutrality. ISPs are unambiguously better off in the unregulated regime, while CPs are unambiguously worse off.
    Keywords: Network neutrality, two-sided markets, Internet, advertising, fragmentation
    JEL: L1 D43 L13 L51
    Date: 2013–07
  3. By: Gudmundsson, Jens (Department of Economics, Lund University); Habis, Helga (Department of Economics, Lund University)
    Abstract: We introduce externalities into a two-sided, one-to-one assignment game by letting the values generated by pairs depend on the behavior of the other agents. Extending the notion of blocking to this setup is not straightforward; a pair has to take into account the possible reaction of the residual agents to be able to assess the value it could achieve. We define blocking in a rather general way that allows for many behavioral considerations or beliefs. The main result of the paper is that a stable outcome in an assignment game with externalities always exists if and only if all pairs are pessimistic regarding the others' reaction following a deviation. The relationship of stability and optimality is also discussed, as is the structure of the set of stable outcomes.
    Keywords: Two-sided matching; assignment game; externalities; stability
    JEL: C71 C78 D62
    Date: 2013–08–27
  4. By: F. Sorrentino; D. Tolic; R. Fierro; J. R. Gordon; A. Mammoli
    Abstract: We consider the dynamics of a smart grid system characterized by widespread distributed generation and storage devices. We assume that agents are free to trade electric energy over the network and we focus on the emerging market dynamics. We consider three different models for the market dynamics for which we present a stability analysis. We see that stability depends on the specific form of the market dynamics and it may depend on the structure of the underlying network topology. We run numerical simulations that confirm our theoretical predictions. As an example, we test our model for the market dynamics over a real network topology, namely, the Tramway 11 Feeder from New Mexico's power network.
    Date: 2013–09
  5. By: Jouini, Elyès; Napp, Clotilde; Nocetti, Diego
    Abstract: In this paper we analyse the risk attitude of a group of heterogenous agents and we develop a theory of comparative collective risk tolerance. In particular, we characterize how shifts in the distribution of individual levels of risk tolerance affect the representative agent's degree of risk tolerance. In the model with efficient risk – sharing and two agents (e.g. a household) with isoelastic preferences we show that an increase of the level of risk tolerance of one of the agents might have an ambiguous impact on the aggregate level of risk tolerance; the latter increases for some levels of aggregate wealth while it decreases for other levels of aggregate wealth. Specifically, there are two possible shapes for aggregate risk tolerance as a function of the risk tolerance level of one of the agents: increasing curve or increasing then decreasing curve. For more general populations we characterize the effect of first order like shifts (individual levels of risk tolerance more concentrated on high values) and second order like shifts (more dispersion on individual levels of risk tolerance) on the collective level of risk tolerance. We also evaluate how shifts in the distribution of individual levels of risk tolerance impact the collective level of risk tolerance in a framework with exogenous egalitarian sharing rules. Our results permit to better characterize differences in risk taking behavior between groups and individuals and among groups with different distribution of risk preferences.
    Keywords: collective risk; heterogenous agents; risk tolerance; isoelastic preferences; aggregate wealth; risk preferences;
    JEL: D1 D81
    Date: 2013
  6. By: Piekkari, Rebecca (Aalto University); Oxelheim, Lars (Research Institute of Industrial Economics (IFN)); Randøy, Trond (University of Agder)
    Abstract: Multinational corporations internationalize their corporate boardrooms in order to capitalize on their commercial and financial internationalization. Board internationalization provides access to specialized knowledge and skills, broadens social networks and ensures greater transparency of strategic decision-making. The entry of a foreign board member is often coupled with a change in the working language of the board. The purpose of the present study is to explore and explain how increased language diversity influences decision-making and work processes of corporate boards. We draw on previous research on board internationalization, diversity and language in multinational corporations. Based on a multiple case study of nine multinational corporations from four Nordic countries, we find evidence of impoverished and silenced discussions in board meetings in those case companies that were unprepared to switch to English as the new working language of the board. Some board members found it difficult to contribute to board meetings, articulate disagreement and felt socially excluded from the board. Such effects on decision-making and work processes were not found in the well-prepared companies. The study adds to the understanding of different modes to internationalize the board as a response to different forms of internationalization of the firm.
    Keywords: Language diversity; Board internationalization; Commercial internationalization; Financial internationalization; Degree of internationalization; Social exclusion; Silencing effect
    JEL: A10
    Date: 2013–09–10

This nep-net issue is ©2013 by Yi-Nung Yang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.