nep-net New Economics Papers
on Network Economics
Issue of 2013‒10‒25
nine papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs. Mobile Networks By Jay Pil Choi; Doh-Shin Jeon; Byung-Cheol Kim
  2. Rewiring the network. What helps an innovation to diffuse? By Katarzyna Sznajd-Weron; Janusz Szwabinski; Rafal Weron; Tomasz Weron
  3. Graphical network models for international financial flows By Paolo Giudici; Alessandro Spelta
  4. “Mobility, networks and innovation: The role of regions’ absorptive capacity” By Ernest Miguélez; Rosina Moreno
  5. Global production sharing and trade patterns in East Asia By Prema-chandra Athukorala
  6. Structure and causality relations in a global network of financial companies By Leonidas Sandoval Junior
  7. Competition through Cooperation? The Case of the German Postal Market By Toufic M. El Masri
  8. Peer Effects in the Demand for Housing Quality By Eleonora Patacchini; Giuseppe Venanzoni;
  9. Welfare Enhancing Coordination in Consumer Cooperatives under Mixed Oligopoly. By Marco Marini; Paolo Polidori; Alberto Zevi; Désirée Teobaldelli

  1. By: Jay Pil Choi (School of Economics, University of New South Wales, Sydney; Department of Economics, Michigan State University); Doh-Shin Jeon (Toulouse School of Economics and CEPR); Byung-Cheol Kim (School of Economics, Georgia Institute of Technology)
    Abstract: We study how net neutrality regulations affect high-bandwidth content providers’ investment incentives in quality of services (QoS). We find that the effects crucially depend on network capacity levels. With a limited network capacity, the prioritized delivery services are complements to content providers' investments and can facilitate entry of high-bandwidth content. By contrast, if the network capacity is large enough, the prioritized delivery and QoS investment are substitutes. In either case, the social welfare effects of the prioritized service is ambiguous. In the limited capacity case, the beneficial effects of entry by high-band width content should be weighed against the cost of increasing congestion for other existing content. In the high capacity case, the negative impact of reduced investment incentives can be counterbalanced by the benefit of improved traffic management. Our findings have important implications for the contrasting neutrality regulations across the Atlantic: US FCC treats mobile networks more leniently than fixed networks, while the EU treats them equally.
    Keywords: Net neutrality, asymmetric regulation, quality of service, investment incentives, queuing, congestion, mobile/fixed Networks
    JEL: L1 L5 O3
    Date: 2013–10
  2. By: Katarzyna Sznajd-Weron; Janusz Szwabinski; Rafal Weron; Tomasz Weron
    Abstract: A fundamental question related to innovation diffusion is how the social network structure influences the process. Empirical evidence regarding real-world influence networks is very limited. On the other hand, agent-based modeling literature reports different and at times seemingly contradictory results. In this paper we study innovation diffusion processes for a range of Watts-Strogatz networks in an attempt to shed more light on this problem. Using the so-called Sznajd model as the backbone of opinion dynamics, we find that the published results are in fact consistent and allow to predict the role of network topology in various situations. In particular, the diffusion of innovation is easier on more regular graphs, i.e. with a higher clustering coefficient. Moreover, in the case of uncertainty – which is particularly high for innovations connected to public health programs or ecological campaigns – a more clustered network will help the diffusion. On the other hand, when social influence is less important (i.e. in the case of perfect information), a shorter path will help the innovation to spread in the society and – as a result – the diffusion will be easiest on a random graph.
    Keywords: Diffusion of innovation; Opinion dynamics; Network structure; Watts-Strogatz network;
    JEL: C63 D70 O33
    Date: 2013–10–20
  3. By: Paolo Giudici (Department of Economics and Management, University of Pavia); Alessandro Spelta (Department of Economics and Management, University of Pavia)
    Abstract: The late-2000s financial crisis has stressed the need of understanding the world financial system as a network of countries, where cross-border financial linkages play a fundamental role in the spread of systemic risks. Financial network models, that take into account the complex interrelationships between countries, seem to be an appropriate tool in this context. In this paper we propose to enrich the topological perspective of network models with a more structured statistical framework, that of graphical Gaussian models, which can be employed to accurately estimate the adjacency matrix, the main input for the estimation of the interconnections between different countries. We consider different types of graphical models: besides classical ones, we introduce Bayesian graphical models, that can take model uncertainty into account, and dynamic Bayesian graphical models, that provide a convenient framework to model temporal cross-border data, decomposing the model into autoregressive and contemporaneous networks. The paper shows how the application of the proposed models to the Bank of International Settlements locational banking statistics allows the identification of four distinct groups of countries, that can be considered central in systemic risk contagion.
    Keywords: Financial network models, Graphical models, Bayesian model selection
    Date: 2013–10
  4. By: Ernest Miguélez (Economics and Statistics Division, World Intellectual Property Organization & AQR-IREA & CReAM); Rosina Moreno (Faculty of Economics, University of Barcelona)
    Abstract: The purpose of this paper is to assess the extent to which regions’ absorptive capacity determines knowledge flows’ impact on regional innovation intensity. In particular, it looks at the role of the cross-regional co-patenting and mobility of inventors in fostering innovation, and how regions with large absorptive capacity make the most of these two phenomena. The paper uses a panel of 274 regions over 8 years to estimate a regional knowledge production function with fixed-effects. Network and mobility variables, and interactions with regions’ absorptive capacity, are included among the r.h.s. variables to test the hypotheses. We find evidence of the role of both mobility and networks. However, inflows of inventors are critical for wealthier regions, while have more nuanced effects for less developed areas. It also shows that regions’ absorptive capacity critically adds an innovation premium to the benefits to tap into external knowledge pools. Indeed, the present study corroborates earlier work on the role of mobility and networks for spatial knowledge diffusion and subsequent innovation. However, it clearly illustrates that a certain level of technological development is critical to take advantage of these phenomena, and therefore “one-size-fits-all” innovation policies need to be reconsidered.
    Keywords: absorptive capacity, inventor mobility, spatial networks, patents, regional innovation. JEL classification:
    Date: 2013–10
  5. By: Prema-chandra Athukorala
    Abstract: This paper analyzes trade patterns in East Asia, with special reference to the implications of the development of global production sharing. It examines the nature and extent of global production sharing and the role of East Asian countries within global production networks. It also highlights the rise of China and it’s positioning within these production networks, explores the implications of engagement in global production sharing for growth patterns, and analyzes the pattern of trade contraction across countries and types of goods during the global financial crisis (2008-2009).
    Keywords: trade patterns, East Asia, China, global production sharing, production networks
    JEL: F14 F15 O53
    Date: 2013
  6. By: Leonidas Sandoval Junior
    Abstract: This work uses the stocks of the 197 largest companies in the world, in terms of market capitalization, in the financial area in the study of causal relationships between them using Transfer Entropy, which is calculated using the stocks of those companies and their counterparts lagged by one day. With this, we can assess which companies influence others according to sub-areas of the financial sector, which are banks, diversified financial services, savings and loans, insurance, private equity funds, real estate investment companies, and real estate trust funds. We also analyzed the causality relations between those stocks and the network formed by them based on this measure, verifying that they cluster mainly according to countries of origin, and then by industry and sub-industry. Then we collected data on the stocks of companies in the financial sector of some countries that are suffering the most with the current credit crisis: Greece, Cyprus, Ireland, Spain, Portugal, and Italy, and assess, also using transfer entropy, which companies from the largest 197 are most affected by the stocks of these countries in crisis. The intention is to map a network of influences that may be used in the study of possible contagions originating in those countries in financial crisis.
    Date: 2013–10
  7. By: Toufic M. El Masri (Leuphana University Lueneburg, Germany)
    Abstract: How can small and medium-sized German postal providers ensure nationwide geographical coverage without the aid of the former monopolist? A closer look at the industry revealed that postal providers in Germany engage in different types of cooperation in order to expand their geographical coverage independently from the market leader. In order to shed light on the effects of cooperation, I conducted a theoretical analysis using a spatial economic model complemented by a brief game-theoretical discussion. Moreover, I provide the first descriptive and case study evidence from unique data collected in 2010 and 2011, within the framework of a German postal market survey. I found that small postal providers cooperate with each other in order to extend their geographical service area and to succeed in the market. Furthermore, I also found – in both the theoretical analysis as well as in the evidence – that there is a negative counter-effect stemming from this cooperation.
    Keywords: Cooperation, Competition, Germany, Network Industries, Postal Sector
    JEL: D24 L22 L51 L97
    Date: 2013–10
  8. By: Eleonora Patacchini (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244-1020); Giuseppe Venanzoni (Sapienza University of Rome, Italy);
    Abstract: Using detailed data on friendship networks within neighborhoods, we investigate the importance of social interactions in one's own residential neighborhood in the demand for housing quality. We find evidence consistent with the presence of peer effects, especially for households living in urban areas. Our findings are in line with the prediction of a model where conformity preferences are the key element underlying economic outcomes that involve interactions with peers. Key Words: Social Networks; Linear-In-Means Model; Spatial Autoregression Model; Social Norms JEL No. A14, C21, D85, R21, Z13
    Date: 2013–09
  9. By: Marco Marini (Department of Computer, Control and Management Engineering, Università "La Sapienza" Roma); Paolo Polidori (Department of Law, University of Urbino “Carlo Bo”); Alberto Zevi (University of Rome "La Sapienza".); Désirée Teobaldelli (Department of Law, University of Urbino “Carlo Bo”)
    Abstract: The aim of this paper is to study the welfare e¤ects of consumer cooperatives in mixed oligopoly markets. We show that under decreasing returns to scale and su¢ ciently high market competition these …rms can contribute more to social welfare when acting on behalf of all consumers rather than only one representative consumer. This is because, by coordinating the preferences of consumers, these …rms reduce their excessive market output, helping the market to come closer to the …rst-best. In all other cases we show that such consumerscoordination is not required to improve welfare.
    Keywords: Consumer-owned Firms, Mixed Oligopoly, Collusion, Welfare
    JEL: C70 C71 D23 D43
    Date: 2013

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