nep-net New Economics Papers
on Network Economics
Issue of 2014‒06‒07
eight papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Network E¤ects, Aftermarkets and the Coase Conjecture : A Dynamic Markovian Approach By Didier LAUSSEL; Ngo Van LONG; Joana RESENDE
  2. Identity changes and the efficiency of reputation systems By Wibral, Matthias
  3. Exploring the interplay, differences, and commonalities between global production networks and global innovation networks of two multinational companies By Liu, Ju; Chaminade, Cristina
  4. Efficiency and Stability in a Process of Teams Formation By Boncinelli, Leonardo; Pin, Paolo
  5. Towards an Economics of Irrigation Networks By Karl Jandoc; Ruben Juarez; James Roumasset
  6. Evolution of the Software-as-a-Service Innovation System Through Collective Intelligence By Kibae Kim; Jorn Altmann
  7. Grading on a Curve, and other Effects of Group Size on All-Pay Auctions By James Andreoni; Andy Brownback
  8. Collaboration networks in a French cluster: do partners really interact with each other? By Bastien Bernela; Rachel Levy

  1. By: Didier LAUSSEL; Ngo Van LONG; Joana RESENDE
    Abstract: This paper analyses the dynamic problem faced by a monopolist …rm that produces a durable good (in the primary market) and also participates in the market for complementary goods and services (the aftermarket). Considering the possibility of network effects in both markets, we investigate the Markov Perfect Equilibrium of the dynamic game played by the monopolist and the forward-looking consumers. We characterize the evolution of the monopolists equilibrium network and the equilibrium price trajectories. We show that the Coase Conjecture remains valid if there are only primary network effects, while it fails when aftermarket network effects are present. We also fi…nd that the properties of the Markov Perfect Equilibrium vary drastically with the intensity of aftermarket network effects.
    Keywords: durable good, network externalities, aftermarkets, Coase Conjecture
    JEL: L12 L14
    Date: 2014
  2. By: Wibral, Matthias
    Abstract: Reputation systems aim to induce honest behavior in online trade by providing information about past conduct of users. Online reputation, however, is not directly connected to a person, but only to the virtual identity of that person. Users can therefore shed a negative reputation by creating a new account. We study the effects of such identity changes on the efficiency of reputation systems. We compare two markets in which we exogenously vary whether sellers can erase their rating profile and start over as new sellers. Buyer trust and seller trustworthiness decrease significantly when sellers can erase their ratings. With identity changes, trust is particularly low towards new sellers since buyers cannot discriminate between truly new sellers and opportunistic sellers who changed their identity. Nevertheless, we observe positive returns on buyer investment under the reputation system with identity changes, and our evidence suggests that trustworthiness is higher than in the complete absence of a reputation system.
    Keywords: trust; reputation; identity changes
    JEL: C91 D02 L14
    Date: 2014
  3. By: Liu, Ju (CIRCLE, Lund University); Chaminade, Cristina (CIRCLE, Lund University)
    Abstract: The recent wave of globalisation has been characterised not only by an increased number of cross-border production networks but also by an increasing number of cross-border innovation networks. However, most literature treats global innovation networks (GINs) as an extension of global production networks (GPNs). Taking a network perspective and based on primary data, this paper explores the composition of and relations between the GPNs and GINs of two multinational companies (MNCs). It finds that the case firms’ GINs and GPNs interplay and the interplay is to a greater extent in the ICT case firm than in the automobile case firm. The case firms’ GINs have more diverse actors and are more centralised than their GPNs but the reason is different in two cases. Meanwhile, the GINs and GPNs share the same relational pattern in both case firms. The paper suggests that theoretically considering GPN and GIN as two different but interwoven layers of a MNCs’ global value creation network may provide better conceptual clarity and may generate more precise implications for practitioners and policymakers.
    Keywords: Global production network; Global innovation network; Multinational companies; Social network analysis; Sweden
    JEL: M16 O32
    Date: 2014–05–23
  4. By: Boncinelli, Leonardo; Pin, Paolo
    Abstract: We analyze a team formation process that generalizes matching models and network formation models, allowing for overlapping teams of heterogeneous size. We apply different notions of stability: myopic team-wise stability, which extends to our setup the concept of pair-wise stability, coalitional stability, where agents are perfectly rational and able to coordinate, and stochastic stability, where agents are myopic and errors occur with vanishing probability. We find that, in many cases, coalitional stability in no way refines myopic team-wise stability, while stochastically stable states are feasible states that maximize the overall number of activities performed by teams.
    Keywords: team formation; stochastic stability; coalitional stability; networks; marriage theorem.
    JEL: C72 C73 D85 H41
    Date: 2014–04–01
  5. By: Karl Jandoc (Department of Economics, University of Hawai`i at Manoa, Honolulu, Hawai`i, USA); Ruben Juarez (Department of Economics, University of Hawai`i at Manoa, and University of Hawai`i Economic Research Organization, Honolulu, Hawai`i, USA); James Roumasset (University of Hawai‘i at Manoa & University of Hawai’i Economic Research Organization)
    Abstract: Both the economics and the engineering of irrigation design are typically based on the assumption of a single source. The more general economic problem is to determine which sources should be developed and how water should be allocated and delivered to various receptor-farmers. This is a problem in network economics. We begin our exploration with the problem of allocating irrigation water from existing sources when the conveyance structures are already in place. Transporting water from a particular source to a farmer entails a conveyance loss such that only a fraction of water sent from the source is received by the farmer. Optimal allocation requires that irrigation demands are matched with the least-cost source, including conveyance losses. Economic networks are then defined as optimally-matched subnetworks. Allocation within each economic network is then determined by equalizing the marginal products of water across farmers, reckoned at the source. Different cases are considered depending whether the sources have similar or different cost functions. We provide a modest beginning to the problem of endogenous sources by examining the problem of locating a single source within the network. We also provide a possible reconciliation of equity and efficiency objectives
    Keywords: Water networks, Spatial efficiency, Conveyance losses.
    JEL: Q25 D85
    Date: 2014–05
  6. By: Kibae Kim (College of Engineering, Seoul National University); Jorn Altmann (College of Engineering, Seoul National University)
    Abstract: One of the notable trends in the software industry is that software vendors provide their software on a platform as a service. Software users consume those software services or compose new services by combining those existing software services. The software vendors, their services, software users, and the platform represent an open innovation system. Collective intelligence is the underlying mechanism for the cooperation between the users of the system, i.e. their continuous reuse of existing software services for the creation of new services. A successfully working software services system is a system that is continuously adapted by its users to meet their needs. The evolution of this software-as-a-service (SaaS) innovation system and the behavior of SaaS users within this system are still unknown. In this paper, we describe the evolution of a SaaS network. The SaaS network consists of nodes (i.e. software services with open interfaces) and links (i.e. the co-development relationships of software services with open interfaces). The results suggest that the SaaS network has gradually grown into a scale-free network with a slight concavity in its cumulative degree distribution. The results also suggest that the topology characteristics are invariant over time except for the early time periods. Furthermore, the results suggest that the SaaS network is not as open (i.e. inter-operable) as its technology let us expect. Considering these results, we imply that SaaS innovation is achieved by platform providers striving to capture users with a few, leading SaaS services. That means, SaaS innovation is not achieved through the possibilities of potential combinations between any kind of SaaS services as could be expected theoretically. These findings are expected to stir further research on the actual structure of open innovation systems that are driven by collective intelligence.
    Keywords: Software-as-a-Service, Service Composition, Composite Services, Mashup, Network Evolution, Scale-Free Network, Openness, Collective Intelligence, Software Industry, Software Platforms.
    JEL: D85 L14 L86 O31 O32 O33
    Date: 2013–12
  7. By: James Andreoni; Andy Brownback
    Abstract: We model contests with a fixed proportion of prizes, such as a grading curve, as all-pay auctions where higher effort weakly increases the likelihood of a prize. We find theoretical predictions for the effect of contest size on effort and test our predictions in a laboratory experiment that compares two-bidder auctions with one prize and 20-bidder auctions with ten prizes. Our results demonstrate that larger contests elicit lower effort by low-skilled students, but higher effort by high-skilled. Large contests also generate more accurate rankings of students and more accurate assignment of high grades to the high-skilled.
    JEL: C91 C92 H52
    Date: 2014–05
  8. By: Bastien Bernela (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers); Rachel Levy (LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - Université des Sciences Sociales - Toulouse I : EA4212 - École Nationale de Formation Agronomique - ENFA - Institut d'Études Politiques [IEP] - Toulouse - Université Toulouse le Mirail - Toulouse II)
    Abstract: We discuss the common hypothesis that, in collaborative projects, all partners interact with each other in homogeneous ways. More precisely, this research aims to determine the existence and frequency of Partner interactions in a collaborative project. From a survey of participants involved in innovation projects approved by a cluster, we collect information about 754 collaboration ties. We then test the impact of several determinants on the existence and frequency of their observed interactions.
    Keywords: Collaboration tie, interaction, inter-organizational networks, cluster, complete graph
    Date: 2014–05–05

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