nep-net New Economics Papers
on Network Economics
Issue of 2014‒08‒25
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The impact of tariff diversity on broadband diffusion: An empirical analysis By Haucap, Justus; Heimeshoff, Ulrich; Lange, Mirjam R. J.
  2. Diversification and Endogenous Financial Networks By Jean-Cyprien H\'eam; Erwan Koch
  3. Dynamic Efficiency and Incentive Regulation: An Application to Electricity Distribution Networks By Rahmatallah Poudineh; Grigorios Emvalomatis; Tooraj Jamasb
  4. Constitutions and Social Networks By Ana Mauleon; Nils Roehl; Vincent Vannetelbosch
  5. Reciprocity Networks and the Participation Problem By Dufwenberg, Martin; Patel, Amrish
  6. Peering into the mist: social learning over an opaque observation network By Barrdear, John

  1. By: Haucap, Justus; Heimeshoff, Ulrich; Lange, Mirjam R. J.
    Abstract: This paper provides an empirical analysis how tariff diversity affects fixed-line broadband uptake, utilizing a new data set with 1497 fixed-line and 2158 mobile broadband tariffs from 91 countries across the globe. An instrumental variable approach is applied to estimate demand, controlling for various industry and socio-economic factors. The empirical results indicate that, firstly, lower prices, more tariff diversity and higher income increase broadband penetration. Secondly, inter-platform competition and mobile broadband prices are not found to have a significant effect on fixed-line broadband penetration. This suggests that low prices and the diversity of broadband offerings are more important drivers of fixed broadband adoption than competition between various technologies (cable networks, fixed-line telephone networks, mobile networks). --
    Keywords: Broadband prices,Tariff diversity,Broadband demand,Broadband penetration,Broadband uptake,Price discrimination,Inter-platform competition
    JEL: L86 L96
    Date: 2014
  2. By: Jean-Cyprien H\'eam; Erwan Koch
    Abstract: We propose to test the assumption that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a liquidity motive (maturity or currency mismatch). We model endogenous interconnections of heterogenous financial institutions facing regulatory constraints using a maximization of their expected utility. Both theoretical and simulation-based results are compared to a stylized genuine financial network. The diversification motive appears to plausibly explain interconnections among key players. Using our model, the impact of regulation on interconnections between major banks -currently discussed at the Basel Committee on Banking Supervision- is analyzed.
    Date: 2014–08
  3. By: Rahmatallah Poudineh; Grigorios Emvalomatis; Tooraj Jamasb
    Abstract: Efficiency and productivity analysis is a central concept in incentive-based regulation of network utilities. However, the efficiency measures obtained from benchmarking predominantly reflect short term performance and hence, provide only a snapshot of the firm’s path towards its long run equilibrium. On the other hand, the factors affecting the short run behaviour of firms may not be adjusted instantaneously when firms undertake investment. In these instances, short run inefficiency caused by investments will be transmitted to subsequent periods. This effect, which arises from costs associated with the adjustment of capital stock or production capacity, is problematic under incentive regulation with ex-post regulatory treatment of capital expenditure. This is because it adversely affects the firms’ short term efficiency and, consequently, regulated revenue. This paper analyses the dynamic behaviour of inefficiency for a balanced panel of 128 Norwegian electricity distribution companies from 2004 to 2010. We show that, in a given period, inefficiency is a combination of period-specific effects (shocks) plus a carry-over component from previous periods due to adjustment costs. Also, we estimate these two components of inefficiency along with the rate of inefficiency transmission between periods.
    Keywords: Dynamic efficiency, innovation, investment incentives, benchmarking, electricity
    JEL: L43 L51 L94 D21 D23 D24
    Date: 2014–08–04
  4. 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
  5. By: Dufwenberg, Martin (Department of Economics, School of Business, Economics and Law, Göteborg University); Patel, Amrish (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Reciprocity can be a powerful motivation for human behaviour. Scholars argue that it is relevant in the context of private provision of public goods. We examine whether reciprocity can resolve the associated coordination problem. The interaction of reciprocity with cost-sharing is critical. Neither cost-sharing nor reciprocity in isolation can solve the problem, but together they have that potential. We introduce new network notions of reciprocity relations to better understand this. Our analysis uncovers an intricate web of nuances that demonstrate the attainable yet elusive nature of a unique outcome.
    Keywords: discrete public good; participation; reciprocity networks; coordination; cost-sharing
    JEL: C72 D03 H41
    Date: 2014–08–13
  6. By: Barrdear, John (Bank of England)
    Abstract: I present a model of social learning over an exogenous, directed network that may be readily nested within broader macroeconomic models with dispersed information and combines the attributes that agents (a) act repeatedly and simultaneously; (b) are Bayes-rational; and (c) have strategic interaction in their decision rules. To overcome the challenges imposed by these requirements, I suppose that the network is opaque: agents do not know the full structure of the network, but do know the link distribution. I derive a specific law of motion for the hierarchy of aggregate expectations, which includes a role for network shocks (weighted sums of agents' idiosyncratic shocks). The network causes agents' beliefs to exhibit increased persistence, so that average expectations overshoot the truth following an aggregate shock. When the network is sufficiently (and plausibly) irregular, transitory idiosyncratic shocks cause persistent aggregate effects, even when agents are identically sized and do not trade.
    Keywords: Dispersed information; network learning; heterogeneous agents; aggregate volatility
    JEL: C72 D82 D83 D84
    Date: 2014–08–01

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