nep-net New Economics Papers
on Network Economics
Issue of 2014‒02‒02
twelve papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Can Network Effects Impede Optimal Contracting in Debt Securities? By Hornuf, Lars; Engert, Andreas
  2. Connected Televisions: Convergence and Emerging Business Models By OECD
  3. Welfare Effects of Public Service Broadcasting in a Free-to-Air TV Market By Sieg, Gernot; Rothbauer, Jula
  4. Estimating broadband diffusion in the EU using NUTS1 regional data By Magali Dauvin and Lukasz Grzybowski
  5. Bargaining Power and Value Sharing in Distribution Networks: a Cooperative Game Theory Approach By Roberto Roson; Franz Hubert
  6. Constitutions and Social Networks By Ana Mauleon; Nils Roehl; Vincent Vannetelbosch
  7. The Effect of On-net/Off-net Differentiation and Heterogeneous Consumers on Network Size in Mobile Telecommunications An Agent-based Approach By Muck, Johannes
  8. Network Risk and Forecasting Power in Phase-Flipping Dynamical Networks By B. Podobnik; A. Majdandzic; C. Curme; Z. Qiao; W. -X. Zhou; H. E. Stanley; B. Li
  9. Constrained Interactions and Social Coordination By Staudigl, Mathias; Weidenholzer, Simon
  10. An assessment of Incentive Regulation in electricity networks: The story so far By Haikel Khalfallah
  11. Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships By Reisinger, Markus; Ambrus, Attila; Calvano, Emilio
  12. Intermediated vs. Direct Sales and a No-Discrimination Rule By Wismer, Sebastian

  1. By: Hornuf, Lars; Engert, Andreas
    Abstract: We examine network effects as an impediment to optimal financial contracting. In devising the terms of their transaction, the parties may prefer to conform to a market standard rather than matching their own contracting needs. To study this possibility, we investigate choice of contract law provisions in European debt securities. In order to disentangle network effects from the effects of substantive differences of contract laws, we take advantage of a natural experiment: In 1999, eleven countries adopted the Euro as an official currency. As a consequence, the investor base of European issuers expanded beyond their respective home states. We hypothesize that the demand for an international standard contract law increased as the national securities markets converged into a single Euro area market. Using a difference-in-difference approach, we show that there is a strong and significant shift to English law for debt securities in Euro area member states as compared to other European countries. Our results are robust to alternative hypotheses and various statistical tests. Choice of law in debt securities may follow a market standard rather than quality differences among the competing contract laws. --
    JEL: G15 L14 K12
    Date: 2013
  2. By: OECD
    Abstract: Connected televisions are defined for the purposes of this report as devices that have the capability to interact with the Internet to display audio-visual content. Connected television is an important development because it permits the provision of certain new and valuable services to end-users. These services will also have implications for the activities of all of the players in the content distribution ecosystem. In addition to identifying the new services that connected television enables, the report analyses in some detail their effects on networks (i.e. the physical communication links that carry content to end-users). The impact on content producers themselves, on content distributors (such as traditional pay television companies), on hardware vendors, and on providers of support services such as advertising and programme guides is considered much more briefly. More detailed examination of these matters could be the subject of future work. The report also includes a discussion of policy implications raised by connected televisions for the actual connected television devices and for network infrastructure.
    Date: 2014–01–22
  3. By: Sieg, Gernot; Rothbauer, Jula
    Abstract: A welfare-maximizing Public Service Broadcaster (PSB) broadcasts both information-type and show-type content if (i) the information consumption of TV viewers generates external benefits for society by improving the ability of voters to control politicians and (ii) the marginal external benefits of information consumption diminish as the information possessed by voters increases. We analyze a two-sided free-to-air TV market with two differentiated private channels and a commercial-free PSB. Welfare depends on the efficiency of the PSB, the external benefits of voter information, and lost rents from the advertising market. Welfare can be higher without a PSB. --
    JEL: L82 D72 L32
    Date: 2013
  4. By: Magali Dauvin and Lukasz Grzybowski
    Abstract: In this paper we use panel data on NUTS 1 regional data for 27 EU countries in the years 2006-2010 to analyze determinants of broadband diffusion. We estimate both linear demand specification and the logistic diffusion function. We find that, after controlling for regional differences due to socioeconomic factors, inter-platform competition approximated by an inter-platform Herfindahl index has a significant positive impact on broadband diffusion. Broadband deployment is lower in countries in which DSL has a greater share in Internet access and it is higher in countries in which cable modem has a greater share in Internet access. Moreover, we find that competition between DSL providers has a significant and positive impact on broadband penetration. First, higher prices for a fully unbundled local loop connection, which represent the cost of providing copper-based Internet services, have a significant and negative impact on broadband penetration. Second, a greater incumbent share in DSL connections has a significant and negative impact on broadband penetration.
    Keywords: Broadband diffusion, Inter-platform competition, Intra-platform competition
    JEL: L1 L96 L51
    Date: 2014
  5. By: Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Franz Hubert (Humboldt University, Berlin)
    Abstract: This paper illustrates a methodology for analyzing bargaining games on network markets, by means of numerical models that can be calibrated with real data. Economic incentives to join or to expand a network depend on how the network surplus is being distributed, which in turn depends on a variety of factors: position of each agent (e.g., a country) in a specific network, its reliability in the cooperation scheme (e.g., geo-political stability), existence of market distortions and availability of outside options (e.g., alternative energy sources). This study is aimed at presenting a game theory methodology that can be applied to real world cases, having the potential to shed light on several political economy issues. The methodology is presented and illustrated with application to a fictitious network structure. The method is based on a two-stage pro- cess: first, a network optimization model is used to generate payoff values under different coalitions and network structures; a second model is subsequently employed to identify cooperative game solutions. Any change in the network structure entails both a variation in the overall welfare level and in the distribution of surplus among agents, as it affects their relative bargaining power. Therefore, expected costs and benefits, at the aggregate as well as at the individual level, can be compared to assess the economic viability of any investment in network infrastructure. A number of model variants and extensions are also considered: changing demand, exogenous instability factors, market distortions, externalities and outside options.
    Keywords: Network Markets, Cooperative Games, Distribution Networks, Bargaining.
    JEL: C63 C71 L95
    Date: 2014
  6. By: Ana Mauleon (Saint-Louis University — Brussels); Nils Roehl (University of Paderborn); Vincent Vannetelbosch (CORE, University of Louvain)
    Abstract: The objective of the paper is to analyze the formation of social networks where individuals are allowed to engage in several groups at the same time. These group structures are interpreted here as social networks. Each group is supposed to have specific rules or constitutions governing which members may join or leave it. Given these constitutions, we consider a social network to be stable if no group is modified any more. We provide requirements on constitutions and players’ preferences under which stable social networks are induced for sure. Furthermore, by embedding many-to-many matchings into our setting, we apply our model to job markets with labor unions. To some extent the unions may provide job guarantees and, therefore, have influence on the stability of the job market.
    Keywords: Social networks, Constitutions, Stability, Many-to-Many Matchings.
    JEL: C72 C78 D85
    Date: 2014–01
  7. By: Muck, Johannes
    Abstract: I explore the effects of on-net / off-net differentiation on network sizes in mobile telecommunications when both rational and non-rational consumers coexist in the market. In particular, three different types of consumers are modeled: (1) fully informed rational (FIR) consumers who are perfectly informed about the true market shares of all networks and choose the network with the lowest expected cost of a call; (2) partly informed rational (PIR) consumers who only observe market shares within a circular sensing field and choose the network with the lowest expected cost of a call based on these observed market shares; and (3) non-rational (NR) consumers who choose the network with the highest market share among their immediate neighbors. Using an agent-based simulation approach and by systematical variation of four key parameters of the model, three key results emerge. First, if the share of FIR consumers is too high, all consumers will eventually join the initially larger network A. Second, if their share in the population is sufficiently large, NR consumers can prevent the growth of clusters of consumers subscribed to network B. Third, if the share of PIR consumers is high, clusters of consumers subscribed to network B can grow, thereby increasing network B s market share, provided that the radius of their circular sensing field is small enough for the cluster size. --
    JEL: C63 K23 L96
    Date: 2013
  8. By: B. Podobnik; A. Majdandzic; C. Curme; Z. Qiao; W. -X. Zhou; H. E. Stanley; B. Li
    Abstract: In order to model volatile real-world network behavior, we analyze phase-flipping dynamical scale-free network in which nodes and links fail and recover. We investigate how stochasticity in a parameter governing the recovery process affects phase-flipping dynamics, and find the probability that no more than q% of nodes and links fail. We derive higher moments of the fractions of active nodes and active links, $f_n(t)$ and $f_{\ell}(t)$, and define two estimators to quantify the level of risk in a network. We find hysteresis in the correlations of $f_n(t)$ due to failures at the node level, and derive conditional probabilities for phase-flipping in networks. We apply our model to economic and traffic networks.
    Date: 2014–01
  9. By: Staudigl, Mathias; Weidenholzer, Simon
    Abstract: We consider a co-evolutionary model of social coordination and network formation where agents may decide on an action in a 2x2 - coordination game and on whom to establish costly links to. We fi nd that a payo ff dominant convention is selected for a wider parameter range when agents may only support a limited number of links as compared to a scenario where agents are not constrained in their linking choice. The main reason behind this result is that under constrained interactions agents face a trade-off between the links they have and those they would rather have. --
    JEL: C73 C72 D85
    Date: 2013
  10. By: Haikel Khalfallah (PACTE - Politiques publiques, ACtion politique, TErritoires - Institut d'Études Politiques [IEP] - Grenoble - CNRS : UMR5194 - Université Pierre-Mendès-France - Grenoble II - Université Joseph Fourier - Grenoble I)
    Abstract: Network regulation is playing an active role in a context of restructuring energy systems for long term transition to a smart grid. Regulation of network companies' activities should consider both cost efficiency objectives and other objectives such as quality and network innovation. It is in this context that incentive regulation tools are discussed and assessed in this paper. The aim is to show their key features and how they could be aligned with the main regulation goals. This paper concludes that they should be considered as complementary tools to address conflicting regulatory aspects in an efficient manner.
    Keywords: incentive regulation ; electricity ; cost efficiency ; quality ; innovation
    Date: 2013–12
  11. By: Reisinger, Markus; Ambrus, Attila; Calvano, Emilio
    Abstract: This paper develops a fairly general model of platform competition in media markets allowing viewers to use multiple platforms. This leads to a new form of competition between platforms, in which they do not steal viewers from each other, but affect the viewer composition and thereby the resulting value of a viewer for the other platform. We label this form of competition "either or both." A central result is that platform ownership does not affect advertising levels, despite nontrivial strategic interaction between platforms. This result holds for general viewer demand functions and is robust to allowing for viewer fees. We show that the equilibrium advertising level is inefficiently high. We also demonstrate that entry of a platform leads to an increase in the advertising level if viewers' preferences for the platforms are negatively correlated, which contrasts with predictions of standard models with either/or competition. We validate this result in an empirical analysis using panel data for the U.S. cable television industry. --
    JEL: L13 M37 L82
    Date: 2013
  12. By: Wismer, Sebastian
    Abstract: When sellers join a platform to sell their products, the platform operator may restrict their strategic decisions. In fact, several platform operators impose most-favored treatment or no-discrimination rules (NDRs), asking sellers not to offer better sales conditions elsewhere. In this paper, I analyze a model that allows for an endogenous split-up of consumers between sales channels. Competing sellers might set different prices across channels, depending on the platform tariff and presence of a NDR. I find that the platform operator imposes a NDR if he faces high transaction costs, if seller competition is weak, and if the initial distribution of consumers on channels is strongly skewed. Prohibiting NDRs can have both positive and negative effects on welfare. --
    JEL: L81 L42 D40
    Date: 2013

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