nep-net New Economics Papers
on Network Economics
Issue of 2014‒02‒21
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Net Neutrality with Competing Internet Platforms By Marc Bourreau; Frago Kourandi; Tommaso Valletti
  2. Expectation Formation and Social Influence. By Andreas Karpf
  3. Imitation and Efficient Contagion By Tristan Boyer; Nicolas Jonard
  4. Systemic Losses Due to Counter Party Risk in a Stylized Banking System By Annika Birch; Tomaso Aste
  5. Peer Effects and Students’ Self-Control By Buechel, Berno; Mechtenberg, Lydia; Petersen, Julia
  6. Economic Rationales of Exclusive Dealing ; Empirical Evidence from the French Distribution Networks By Muriel Fadairo; Jianyu Yu

  1. By: Marc Bourreau (Telecom ParisTech and CREST-LEI); Frago Kourandi (Athens University of Economics and Business); Tommaso Valletti (University of Rome Tor Vergata and Imperial College London)
    Abstract: We propose a two-sided model with two competing Internet platforms, and a continuum of Content Providers (CPs). We study the effect of a net neutrality regulation on capacity investments in the market for Internet access, and on innovation in the market for content. Under the alternative discriminatory regime, platforms charge a priority fee to those CPs which are willing to deliver their content on a fast lane. We find that under discrimination investments in broadband capacity and content innovation are both higher than under net neutrality. Total welfare increases, though the discriminatory regime is not always beneficial to the platforms as it can intensify competition for subscribers. As platforms have a unilateral incentive to switch to the discriminatory regime, a prisoner's dilemma can arise. We also consider the possibility of sabotage, and show that it can only emerge, with adverse welfare effects, under discrimination.
    Keywords: Net neutrality; Two-sided markets; Platform competition; Investment; Innovation.
    JEL: L13 L51 L52 L96
    Date: 2014–02–14
  2. By: Andreas Karpf (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: This article investigate the role of social influence for the expectation formation of economic agents. Using self-organizing Kohonen maps the repeated cross-section data set of the University of Michigan consumer survey is transformed into a pseudo panel allowing to monitor the expectation formation of cohorts with regard to business confidence over the whole available time span (January 1978 - June 2013). Subsequently the information theoretic concept of transfer entropy is used to reveal the role of social influence on the expectation formation as well as the underlying network structure. It is shown that social influence strongly depends on socio-demographic characteristics and also coincides with a high degree of connectivity. The social network estimated in this way follows a power-law and thus exhibits similar structure as networks observed in other contexts.
    Keywords: Social networks, expectations, household survey.
    JEL: D12 D83 D84 D85
    Date: 2014–02
  3. By: Tristan Boyer; Nicolas Jonard
    Abstract: This paper is about the diffusion of cooperation in an infinite population of networked individuals repeatedly playing a Prisoner’s Dilemma. We formulate conditions on payoffs and network structure such that, starting from an initial seed group, imitative learning results in the overall adoption of cooperation — efficient contagion. Key to this result is the pattern of interaction among players who are at the same distance from the initial seed group. We find that the more these agents interact among themselves rather than with players who are closer to or further away from the initial seed group, the easier it is for efficient contagion to take place. We highlight the importance of cycles for efficient contagion, and show that the presence of critical edges prevents it. We also find that networks organized as dense clusters sparsely connected to one another tend to resist efficient contagion. Finally, we find that the likelihood of efficient contagion in a network increases when information neighborhoods extend beyond interaction neighborhoods.
    Keywords: networks, imitation, contagion
    JEL: C7 D8
    Date: 2014–01–06
  4. By: Annika Birch; Tomaso Aste
    Abstract: We report a study of a stylized banking cascade model investigating systemic risk caused by counter party failure using liabilities and assets to define banks' balance sheet. In our stylized system, banks can be in two states: normally operating or distressed and the state of a bank changes from normally operating to distressed whenever its liabilities are larger than the banks' assets. The banks are connected through an interbank lending network and, whenever a bank is distressed, its creditor cannot expect the loan from the distressed bank to be repaid, potentially becoming distressed themselves. We solve the problem analytically for a homogeneous system and test the robustness and generality of the results with simulations of more complex systems. We investigate the parameter space and the corresponding distribution of operating banks mapping the conditions under which the whole system is stable or unstable. This allows us to determine how financial stability of a banking system is influenced by regulatory decisions, such as leverage; we discuss the effect of central bank actions, such as quantitative easing and we determine the cost of rescuing a distressed banking system using re-capitalisation. Finally, we estimate the stability of the UK and US banking systems in the years 2007 and 2012 showing that both banking systems were more unstable in 2007 and connectedness on the interbank market partly caused the banking crisis.
    Date: 2014–02
  5. By: Buechel, Berno; Mechtenberg, Lydia; Petersen, Julia
    Abstract: We conducted a multi-wave field experiment to study the interaction of peer effects and self-control among undergraduate students. We use a behavioral measure of self-control based on whether students achieve study related goals they have set for themselves. We find that both self-control and the number of talented friends increase students’ performance. We then set out to test the theoretical prediction of Battaglini, Bénabou and Tirole (2005) that (only) sufficiently self-controlled individuals profit from interactions with peers. We find that peers with high self-control are more likely to connect to others, have a higher overall number of friends and have a higher number of talented friends. Moreover, positive news about self-controlled behavior of their peers increases students’ own perseverance. Hence, our findings are consistent with the model of Battaglini, Bénabou and Tirole. In addition, we find that female students are more likely to have high self-control, but do not outperform male students. One reason for this is that female students have a lower number of talented friends than their male counterparts, thereby profiting less from positive peer effects.
    Keywords: Self-control; Peer Influence; Social Networks; Goals; Time preferences; Procrastination; Willpower; School Performance; Experiment
    JEL: C93 D85 I21 J24
    Date: 2014–01–28
  6. By: Muriel Fadairo (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I); Jianyu Yu (Southwestern University of Finance and Economics - Southwest University of Economics and Finance)
    Abstract: This paper investigates the rationales of exclusive dealing (ED), which is one of the most common forms of vertical restraint and attracts intense policy debates in anti-trust regulations. Based on a survey of the theoretical literature, we derive several hypotheses relative to the anti- and pro-competitive motivations of ED. These hypotheses are submitted to French data regarding several types of distribution networks in a wide range of sectors. Considering the industry features, our empirical analysis indicates that in the French distribution system, ED contracts tend to be procompetitive. The evidence suggests that the motivation of ED mainly lies in its positive role to foster the investment of upstream firms.
    Keywords: Exclusive dealing; Vertical restraints ; Competition policy
    Date: 2014–02–12

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