nep-net New Economics Papers
on Network Economics
Issue of 2015‒04‒11
twelve papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Competing one-way essential complements: the forgotten side of net neutrality By Broos, Sébastien; Gautier, Axel
  2. Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition By Bischoff, Oliver; Buchwald, Achim
  3. Industrial Upgrading in Global Production Networks: The Case of the Chinese Automotive Industry By Yansheng LI; Xin Xin KONG; Miao ZHANG
  4. Innovation in Business Group Firms: Influence of Network Diversity By Kerai, Anita; Sharma, Sunil
  5. Revealing incentives for Compatibility Provision in Vertically differentiated Network Industries By Filomena Garcia; Cecilia Vergari
  6. Neighborhood Effects in Education By Del Bello, Carlo L.; Patacchini, Eleonora; Zenou, Yves
  7. Insurance in Extended Family Networks By Orazio Attanasio; Corina Mommaerts; Costas Meghir
  8. Measuring the Connectedness of the Global Economy By Matthew Greenwood-Nimmo; Viet Hoang Nguyen
  9. Online social networks and trust By Fabio Sabatini; Francesco Sarracino
  10. Can Farmers Create Efficient Information Networks? Experimental Evidence from Rural India By A. Stefano Caria; Marcel Fafchamps
  11. Exploring the Geography of China's Airport Networks during 1980s-2000s: A Hybrid Complex-Network Approach By Zhengbin Dong; Wenjie Wu
  12. Are Results of Social- and Self-Image Concerns in Voluntary Contributions Game Similar? By Martin Daniel Siyaranamual

  1. By: Broos, Sébastien (Université de Liège, HEC Management School, Belgium); Gautier, Axel (Université catholique de Louvain, CORE, Belgium)
    Abstract: We analyze the incentives of internet service providers (ISPs) to break net neutrality by excluding internet applications competing with their own products, a typical example being the exclusion of VoIP applications by telecom companies offering internet and voice services. Exclusion is not a concern when the ISP is a monopoly because it can extract the additional surplus created by the application through price rebalancing. When ISPs compete, it could lead to a fragmented internet where only one firm offers the application. We show that, both in monopoly and duopoly, prohibiting the exclusion of the app and surcharges for its use –a strong form of net neutrality– is not welfare improving.
    Keywords: net neutrality, foreclosure, one-way essential complements
    JEL: L12 L13 L51 L96
    Date: 2014–12–15
  2. By: Bischoff, Oliver; Buchwald, Achim
    Abstract: This paper sheds new light on the assessment of firm networks via multiple directorships in terms of corporate firm performance. Using a large sample of European listed firms in the period from 2003 to 2011 and system GMM we find a significant compensation effect on corporate firm performance for the initial negative effect of horizontal multiple directorships by product market competition. In markets with effective competition, horizontal multiple directorships turn out to be an efficient mechanism to increase firm performance and thus assure competitive advantages. By contrast, linkages between up- and downstream firms have no significant influence on financial performance, irrespective of the level of competition intensity.
    Keywords: Horizontal and Vertical Firm Networks, Multiple Directorships, Corporate Governance, Product Market Competition, Dynamic Panel
    JEL: C23 G32 G34 L14 L25 L40
    Date: 2015–04–01
  3. By: Yansheng LI (Beijing Zhengxiang Yongdao Management Consulting Company); Xin Xin KONG (Chinese Academy of Science and Technology for Development); Miao ZHANG (Department of Development Studies, University of Malaya)
    Abstract: This article examines the development of China’s automotive industry. The evidence shows that integration in global production networks has stimulated upgrading of technological capabilities among automotive firms. However, the competitiveness and intra-industry analyses show mixed results. Although intraindustry trade in automotive products has improved since 2000, the trade competitiveness of completely built up vehicles has largely remained in low value added activities. Nevertheless, firm-level evidence shows that the industry has undergone considerable upgrading, albeit in low value added activities. Trade integration and host-country institutional support have been the prime driving forces of technological upgrading in the automotive industry in China.
    Keywords: automotive industry, foreign firms, production networks, technological capabilities
    JEL: L62 L22 L14 O31
    Date: 2015–02
  4. By: Kerai, Anita; Sharma, Sunil
    Abstract: Extant research on influence of ownership structure on innovation suggests a positive relationship between business group affiliation and innovation. While it is true that firms affiliated to business groups seem to benefit from availability of internal capital, determinants that influence the process of innovation have not been examined. This Paper aims to study the influence of network diversity on innovation for firms affiliated to a business group. We draw upon literature on resource based and principal-agency literature to study nature of knowledge exploration and exploitation by business group firms. We argue that network diversity impacts nature of innovation by business group firms.
  5. By: Filomena Garcia (Indiana University and ISEG/UECE); Cecilia Vergari (University of Bologna)
    Abstract: Abstract: We determine the incentives for compatibility provision of firms that produce network goods with different intrinsic qualities. We consider the case in which both firms have the power to veto compatibility and the case in which none has this power. We obtain that if consumers have a strong preference for the network, there are multiple equilibria in pricing and consumer decisions. We show that in some equilibria, it is the high quality firm that invests in compatibility, whereas in others, the low quality fi rm triggers compatibility. The socially optimal compatibility level is zero, except under strong network effects, where one of the equilibria has all consumers buying the low quality good. In this case, a partial level of compatibility is optimal. Comparison between the privately and the socially optimal levels of compatibility depends on whether or not rms have veto power over compatibility.
    Keywords: Compatibility, vertical
    Date: 2015–05
  6. By: Del Bello, Carlo L. (Paris School of Economics); Patacchini, Eleonora (Cornell University); Zenou, Yves (Stockholm University)
    Abstract: Using unique geo-coded information on the residential address of a representative sample of American adolescents and their friends, we revisit the importance of geographical proximity in shaping education outcomes. Our findings reveal no evidence of residential neighborhood effects. Social proximity, as measured by similarity in religion, race and family income as well as in unobserved characteristics, appears to play a major role in facilitating peer influence. Our empirical strategy is able to control for the endogeneity of both social network and location choices.
    Keywords: neighborhood effects, social networks, link formation, education
    JEL: C21 Z13
    Date: 2015–03
  7. By: Orazio Attanasio (University College London & Institute for Fiscal Studies); Corina Mommaerts (Dept. of Economics, Yale University); Costas Meghir (Cowles Foundation, Yale University)
    Abstract: We investigate partial insurance and group risk sharing in extended family networks. Our approach is based on decomposing income shocks into group aggregate and idiosyncratic components, allowing us to measure the extent to which each is insured, having accounted for public insurance programs. We apply our framework to extended family networks in the United States by exploiting the unique intergenerational structure of the PSID. We find that over 60% of shocks to household income are potentially insurable within family networks. However, we find little evidence that the extended family provides insurance for such idiosyncratic shocks.
    Keywords: Incomplete markets, Partial Insurance, Consumption smoothing, Extended Family Networks, Savings, Intergenerational transfers, Stochastic income processes
    JEL: D12 D31 D91 E21 E24 H31
    Date: 2015–03
  8. By: Matthew Greenwood-Nimmo (Department of Economics, The University of Melbourne); Viet Hoang Nguyen (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne Yongcheol Shin Department of Economics and Related Studies, University of York)
    Abstract: We develop a technique to evaluate macroeconomic connectedness in any multi-country macroeconomic model with an approximate VAR representation. We apply our technique to a large Global VAR covering 25 countries and derive vivid representations of the connectedness of the system. We show that the US, the Eurozone and the crude oil market exert a dominant influence in the global economy and that the Chinese and Brazilian economies are also globally significant. Recursive analysis over the period of the global financial crisis shows that shocks to global equity markets are rapidly and forcefully transmitted to real trade flows and real GDP.
    Keywords: Generalised Connectedness Measures (GCMs), international linkages, network analysis, macroeconomic connectedness
    JEL: C32 C53 E17
    Date: 2015–03
  9. By: Fabio Sabatini; Francesco Sarracino
    Abstract: We explore how participation in social networking sites (SNS) such as Facebook and Twitter affects the most economically relevant aspect of social capital, trust. We use measures of trust in strangers (or social trust), trust in neighbours and trust in the police. We address endogeneity in the use of SNS by exploiting the variation in the availability of broadband for high-speed Internet, which relates to technological characteristics of the pre- existing voice telecommunication infrastructures. We find that all the proxies of trust significantly decrease with participation in online networks. We discuss several interpretations of the results in light of the specific features of Internet-mediated social interaction.
    Keywords: Internet; broadband; online networks; social networking sites; Facebook; trust; social capital; hate speech.
    JEL: C36 D85 O33 Z1
    Date: 2015–04–04
  10. By: A. Stefano Caria; Marcel Fafchamps
    Abstract: We run an artefactual field experiment in rural India which tests whether farmers can create efficient networks in a repeated link formation game, and whether group categorization results in homophily and loss of network efficiency. We find that the efficiency of the networks formed in the experiment is significantly lower than the efficiency which could be achieved under selfish, rational play. Many individual decisions are consistent with selfish rationality and with a concern for overall welfare, but the tendency to link with the ‘most popular’ farmer in the network causes large efficiency losses. When information about group membership is disclosed, social networks become more homophilous, but not significantly less efficient. Networks play an important role in the diffusion of innovations in developing countries. If they are inefficiently structured, there is scope for development policies that support diffusion.
    Date: 2015
  11. By: Zhengbin Dong; Wenjie Wu
    Abstract: Air networks are normal examples of transportation systems among ubiquitous big data networks in dynamic nature. This is particularly the case in developing countries with rapid airport network expansions. This paper explores the structure and evolution of the trunk airport network of China (ANC) in major years during 1980s-2000s. We generalise the complex network approach developed in existing studies and further test for statistical properties of weighted network characteristics by using pair-wise traffic flows. We find that ANC is a small-world network in which (i) the number of airflight connections and (ii) the number of shortest paths going through a given airport city meet the densification law, however, its degree distribution does not follow power-law statistics like other countries' airport networks. The spatiotemporal decomposition of network metric plots and the visualization maps leads to a rich harvest of stylized ANC structures: (i) national hub-and-spoke patterns surrounding mega-cities; (ii) regional broker patterns surrounding Kunming and Urumqi, and (iii) local heterogeneous disparity patterns in isolated geographical cities, such as Lhasa, Lijiang, Huangshan, etc. These findings have important implications towards understanding the geo-political and economic forces at stake in shaping China's urban systems.
    Keywords: Airport system, complex network, regional development, China
    JEL: O18 R12 P25
    Date: 2015–03
  12. By: Martin Daniel Siyaranamual (Department of Economics, Padjadjaran University)
    Abstract: Social interactions may encourage the cooperative behaviours by triggering either self-image concerns (when one sees others’ decisions without being seen) or social-image concerns (when one’s decision is seen by others). A laboratory experiment is designed to compare these two concerns directly, using a four-players finitely repeated public goods experiment on two directed star networks, self-image and social-image networks. The comparison of the players voluntary contributions in both types of networks reveals that their contributing behaviours are statistically indistinguishable. However, the players who belong to the self-image network are more willing to conform with the group behaviours, meaning that they will increase (reduce) the contributions if theirs are below (above) their groups average. Furthermore, I also find evidence that the contributing behaviours are more stable in the self-image networks than in the social-image network.
    Keywords: Social-image; Self-image; Directed network; Public good experiment
    JEL: C92 D19 H41 Z13
    Date: 2015–02

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