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on Network Economics |
| By: | Anomita Ghosh (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development Research) |
| Abstract: | We analyze strategic trade policy for differentiated network goods oligopolies under alternative scenarios, when there is export rivalry between two countries. We show that, under price competition without managerial delegation, it is optimal to tax (subsidize) exports, if network externalities are weak (strong). But, the oppos ite is true under price competition with relative performance based managerial delegation in firms. In contrast, under quantity competition, the optimal trade policy always involves subsidization of exports. Nonetheless, the optimal rate of export subsidy under quantity competition is always higher than that under price competition. We also show that, under quantity (price) competition without managerial delegation, trade policy interventions in the presence of sufficiently strong (weak or very strong) network externalities lead to higher social welfare of each exporting country compared to that under free trade. However, under quantity (price) competition with managerial delegation, trade policy interventions result in Pareto inferior outcomes always (unless network externalities are strong). |
| Keywords: | Strategic trade policy, network goods, relative performance based managerial delegation, price competition, quantity competition |
| JEL: | F12 F13 L13 L22 D21 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2014-039&r=net |
| By: | Roberto Roson; Franz Hubert |
| 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 process: 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 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp61&r=net |
| By: | Susan Athey (Stanford University); Emilio Calvano (CSEF, Università di Napoli Federico II); Joshua S. Gans (University of Toronto and NBER) |
| Abstract: | We provide a model of online advertising display markets where consumer attention may be divided among multiple publishers and, consequently, their advertising attention may be allocated to different platforms. We demonstrate that this gives rise to a mixture of single- and multi-homing advertisers and some consequent matching inefficiency between advertisers and consumers. Thus, as the number of switching consumers expands (associated with, say, the internet’s impact on news publishers), ad prices fall and a number of other competitive effects arise. We demonstrate that increased switching leads advertisers to favor reach over frequency and creates an incentive for contracting and technology improvements that can guarantee impressions to advertisers. Finally, we analyze the strategic choice of ad capacity, showing that, in general, increased switching leads to greater equilibrium ad capacity and lower prices. |
| Keywords: | advertising, media, newspapers, matching, multi-homing, singlehoming, tracking, two-sided markets, platforms |
| JEL: | L11 L82 |
| Date: | 2014–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:379&r=net |
| By: | Sartori, Martina; Schiavo, Stefano |
| Abstract: | In this paper, we analyze the link between virtual water trade, that is, the flow of water embodied in the international trade of agricultural goods, and vulnerability to external shocks from the vantage point of network analysis. While a large body of work has shown that virtual water trade can enhance water saving on a global scale, being especially beneficial to arid countries, there are increasing concerns that more openness makes countries more dependent on foreign food suppliers and especially more susceptible to external shocks. Our evidence reveals that the increased globalization witnessed in the last 30 years is not associated with the increased frequency of adverse shocks (in either precipitation or food production). Furthermore, building on recent advances in network analysis that connect the stability of a complex system to the interaction between the distribution of shocks and the network topology, we find that the world is more interconnected, but not necessarily less stable. |
| Keywords: | virtual water trade, vulnerability, complex network, shocks |
| JEL: | F14 F18 Q25 Q56 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59210&r=net |
| By: | Tim Brühn (University of Giessen); Annette Meinusch (University of Giessen); Georg Götz (University of Giessen) |
| Abstract: | This paper analyzes the incentives of a monopolistic matchmaker to generate user-specific information in order to increase match-quality and profits. By merging two-sided-markets with two-sided-matching we derive a micro-foundation of cross-side externalities dependent on the number of potential matches and the accuracy-level of user-specific information. Incentives to invest into identification technologies are determined by the scalability of the (fixed) investments and the resulting effect on match-quality. We show that these effects work into opposing directions, i.e., while scalability works in favor for platforms with large customer bases, the effect of identification on match-quality is greater for small scale platforms. |
| Keywords: | two-sided markets, two-sided matching, advertising, segmentation and identification |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201448&r=net |
| By: | Wolfgang Karl Härdle; Natalia Sirotko-Sibirskaya; Weining Wang; |
| Abstract: | We propose a semiparametric measure to estimate systemic interconnectedness across financial institutions based on tail-driven spill-over effects in a ultra-high dimensional framework. Methodologically, we employ a variable selection technique in a time series setting in the context of a single-index model for a generalized quantile regression framework. We can thus include more financial institutions into the analysis, to measure their interdependencies in tails and, at the same time, to take into account non-linear relationships between them. A empirical application on a set of 200 publicly traded U. S. nancial institutions provides useful rankings of systemic exposure and systemic contribution at various stages of financial crisis. Network analysis, its behaviour and dynamics, allows us to characterize a role of each sector in the financial crisis and yields a new perspective of the nancial markets at the U. S. financial market 2007 - 2012. |
| Keywords: | Systemic Risk, Systemic Risk Network, Generalized Quantile, Quantile Single-Index Regression, Value at Risk, CoVaR, Lasso |
| JEL: | G01 G18 G32 G38 C21 C51 C63 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2014-066&r=net |