nep-net New Economics Papers
on Network Economics
Issue of 2015‒05‒16
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Role of Critical Mass in Establishing a Successful Network Market: An Experimental Investigation By Bradley J. Ruffle, Avi Weiss, Amir Etziony
  2. Spatial Coordination in Agglomeration Bonus Schemes with Transaction Costs and Communication: An Experimental Study By Simanti Banerjee; Timothy N. Cason; Frans P. de Vries; Nick Hanley
  3. Peer Effects, Fast Food Consumption and Adolescent Weight Gain By Bernard Fortin; Myra Yazbeck
  4. Homophily and Triadic Closure in Evolving Social Networks By Irene Crimaldi; Michela Del Vicario; Greg Morrison; Walter Quattrociocchi; Massimo Riccaboni
  6. Structure of global buyer-supplier networks and its implications for conflict minerals regulations By Takayuki Mizuno; Takaaki Ohnishi; Tsutomu Watanabe

  1. By: Bradley J. Ruffle, Avi Weiss, Amir Etziony (Wilfrid Laurier University)
    Abstract: A network market is a market in which the benefit each consumer derives from a good is an increasing function of the number of consumers who own the same or similar goods. A major obstacle that plagues the introduction of a network good is the ability to reach critical mass, namely, the minimum number of buyers required to render purchase worthwhile. This can be likened to a coordination game with multiple Pareto-ranked equilibria. Through a series of experiments, we study consumers' ability to coordinate on purchasing the network good. Our results highlight the central importance of the level of the critical mass. Neither an improved reward-risk ratio through lower prices nor previous success at a lower critical mass facilitates the establishment of a network market when the critical mass is sufficiently high.
    Keywords: experimental economics, network goods, coordination game, critical mass
    JEL: C92 L19
    Date: 2015–05–12
  2. By: Simanti Banerjee (University of Nebraska-Lincoln); Timothy N. Cason (Purdue University); Frans P. de Vries (University of Stirling); Nick Hanley (Department of Geography and Sustainable Development, University of St. Andrews)
    Abstract: Agglomeration Bonus (AB) schemes reward private landowners to spatially coordinate land use decisions to enhance the supply of ecosystem services. The AB mechanism creates a coordination game with multiple Pareto ranked Nash equilibria, which correspond to different spatially-coordinated land use patterns. This paper experimentally analyses subjects’ participation decisions, land use choices and AB performance in the presence of transaction costs, with and without the option to communicate with neighboring subjects in a local network setting. The experiment varies transaction costs at two levels (high and low), which affects the risks and payoffs of coordinating on the different equilibria. Results indicate a significant difference in participation under high and low transaction costs in the early stages of the experiment. Increased experience reduces participation rates and AB performance. Costless pre-play communication induces full participation and land use choice pertaining to the efficient Nash equilibrium. If communication is costly, the level of transaction costs affects participation levels, the degree of spatial coordination, and the ecosystem services benefits produced. Our study suggests that performance of Payment for Ecosystem Services schemes in general and the AB scheme in particular can be improved through mechanisms intended to reduce the costs associated with participation and communication.
    Keywords: Coordination Games, Lab Experiments, Local Networks, Payment for Ecosystem Services
    JEL: C91 D83 D81 Q51 Q
    Date: 2015–05
  3. By: Bernard Fortin; Myra Yazbeck
    Abstract: This paper aims at opening the black box of peer effects in adolescent weight gain. Using Add Health data on secondary schools in the U.S., we investigate whether these effects partly flow through the eating habits channel. Adolescents are assumed to interact through a friendship social network. We propose a two-equation model. The first equation provides a social interaction model of fast food consumption. To estimate this equation we use a quasi maximum likelihood approach that allows us to control for common environment at the network level and to solve the simultaneity (reflection) problem. Our second equation is a panel dynamic weight production function relating an individual’s Body Mass Index z-score (zBMI) to his fast food consumption and his lagged zBMI, and allowing for irregular intervals in the data. Results show that there are positive but small peer effects in fast food consumption among adolescents belonging to a same friendship school network. Based on our preferred specification, the estimated social multiplier is 1.15. Our results also suggest that,in the long run, an extra day of weekly fast food restaurant visits increases zBMI by 4.45% when ignoring peer effects and by 5.11%, when they are taken into account.
    Keywords: Obesity, overweight, peer effects, social interactions, fast food, spatial models
    JEL: C31 I10 I12
    Date: 2015
  4. By: Irene Crimaldi (IMT Lucca Institute for Advanced Studies); Michela Del Vicario (IMT Lucca Institute for Advanced Studies); Greg Morrison (IMT Lucca Institute for Advanced Studies); Walter Quattrociocchi (IMT Lucca Institute for Advanced Studies); Massimo Riccaboni (IMT Lucca Institute for Advanced Studies)
    Abstract: We present a new network model accounting for homophily and triadic closure in the evolution of social networks. In particular, in our model, each node is characterized by a number of features and the probability of a link between two nodes depends on common features. The bipartite network of the actors and features evolves according to a dynamics that depends on three parame-ters that respectively regulate the preferential attachment in the transmission of the features to the nodes, the number of new features per node, and the power-law behavior of the total number of observed features. We provide theoretical results and statistical estimators for the parameters of the model. We validate our approach by means of simulations and an empirical analysis of a network of scientifc collaborations.
    Keywords: social network, bipartite network, preferential attachment, homophily triadic closure, transitivity
    JEL: C13 C18 Z13
    Date: 2015–05
  5. By: Zeynep Birce Ergor (Cankaya University); Elif Akagun Ergin (Cankaya University)
    Abstract: There is an increasing use of social media on a global scale and it has been causing organizations to restructure and adjust their marketing activities. The goal of achieving a sustainable competitive advantage makes it crucial to adapt to the ever-changing trends in the market. Social media contributes to this goal since it has a considerable impact on constructing the brand value for organizations. The social networks helps organizations to enhance the development of strong brands not only through promoting their products and services but also providing them the platform to build strong and reliable relationships with their customers. This paper aims to investigate the role of social media on brands by examining the active role of banks on social networks. For this purpose, the “tweets” of the five Turkish banks with the highest brand values in the banking sector have been analyzed by content analysis method. The sample banks are drawn from the Banker’s annual Top 500 Banking Brands 2014 report. Brand value is used as the selection criteria of the sample banks and “Twitter” social network is considered as the primary social media outlet. The data is composed of the “tweets” and gathered from the official Twitter accounts of the banks having the highest brand values in Turkey. The “retweets” and the texts sent by other Twitter users are excluded. The findings indicate that, the sample banks are active users of social media. They do not only use Twitter but also other social networks in addition to their official websites. In addition, the paper displays specific purposes the banks have for using social media sites.
    Keywords: Social media, Twitter, Turkish Banking Sector, Brand Value, Content Analysis
    JEL: M00 M31 M30
  6. By: Takayuki Mizuno (National Institute of Informatics); Takaaki Ohnishi (The University of Tokyo); Tsutomu Watanabe (The University of Tokyo)
    Abstract: We investigate the structure of global inter-firm linkages using a dataset that contains information on business partners for about 400,000 firms worldwide, including all the firms listed on the major stock exchanges. Among the firms, we examine three networks, which are based on customer-supplier, licensee-licensor, and strategic alliance relationships. First, we show that these networks all have scale-free topology and that the degree distribution for each follows a power law with an exponent of 1.5. The shortest path length is around six for all three networks. Second, we show through community structure analysis that the firms comprise a community with those firms that belong to the same industry but different home countries, indicating the globalization of firms' production activities. Finally, we discuss what such production globalization implies for the proliferation of conflict minerals (i.e., minerals extracted from conflict zones and sold to firms in other countries to perpetuate fighting) through global buyer-supplier linkages. We show that a limited number of firms belonging to some specific industries and countries plays an important role in the global proliferation of conflict minerals. Our numerical simulation shows that regulations on the purchases of conflict minerals by those firms would substantially reduce their worldwide use.
    Date: 2015–05

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