nep-net New Economics Papers
on Network Economics
Issue of 2015‒06‒20
nine papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Triple and Quadruple Play Bundles of Communication Services By OECD
  2. A Noncooperative Model of Contest Network Formation By Kenan Huremovic
  3. Airport Prices in a Two-Sided Market Setting: Major US Airports By Ivaldi, Marc; Sokullu, Senay; Toru, Tuba
  4. Risk Taking and Information Aggregation in Groups By Spiros Bougheas; Jeroen Nieboer; Martin Sefton
  5. Values for Cooperative Games over Graphs and Games With Inadmissible Coalitions By Ziv Hellman; Ron Peretz
  6. Teams, Organization and Education Outcomes: Evidence from a field experiment in Bangladesh By Youjin Hahn; Asadul Islam; Eleonora Patacchini; Yves Zenou
  7. Entry or Exit? The Effect of Voluntary Participation on Cooperation By Daniele Nosenzo; Fabio Tufano
  8. Law enforcement and drug trafficking networks: a simple model By Raffo López Leonardo
  9. On the Characteristics of the Free Market in a Cooperative Society By Norbert Agbeko

  1. By: OECD
    Abstract: This report examines the provision of multiple communication services over broadband access networks, a phenomenon known as “bundling”. It highlights that care should be taken to ensure that such offers do not unreasonably constrain competition or bind consumers to a single provider in a manner that decreases welfare. The provision of bundled communication services can increase competition if it brings more choices, higher quality, or lower prices to consumers from the facilities-based networks providing bundled offers. On the other hand, it may also lead to increased consolidation between fixed and mobile network providers and result in less competition in wholesale and retail markets.
    Date: 2015–06–18
  2. By: Kenan Huremovic (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS)
    Abstract: Network structure has a significant role in determining the outcomes of many socio-economic relationships, including antagonistic ones. In this paper we study a situation in which agents, embedded in a network, simultaneously play interrelated bilateral contest games with their neighbours. Spillovers between contests induce complex local and global network effects. We first characterize the equilibrium of the game on an arbitrary fixed network. Then we study a network formation model, introducing a novel but intuitive link formation protocol. As links represent negative relationships, link formation is unilateral while link destruction is a bilateral action. The unique stable network topology is the complete k-partite network with partitions of different sizes. This model also provides a micro-foundation for the concept of structural balance, and the main results go in line with theoretical and empirical findings from other disciplines, including biology and sociology.
    Keywords: network formation, game on network, contest, structural balance
    JEL: D85 D74
    Date: 2015–02
  3. By: Ivaldi, Marc; Sokullu, Senay; Toru, Tuba
    Abstract: This paper analyzes the rationale of airport business models. First, it provides evidence that the airports should be considered as two sided markets because of significant network externalities between the airlines and the passengers. This result invalidates the traditional approach where the airport-airline-passenger relationship is considered as vertically integrated, taking passengers as final consumers. Second, a testing procedure aimed at eliciting the real business model of airports demonstrates that the major U.S. airports do not internalize the externalities existing between airlines and passengers. We find that these airports set profit maximizing prices for the non-aeronautical services to passengers and Ramsey prices for the aeronautical services to airlines. Given these results, we conduct a welfare analysis by simulating the implementation of profit maximizing prices when an airport fully accounts for the two-sidedness of its activities. In particular, we show that the impact on social welfare is not independent on the specific features of each airport and that the privatization of airports cannot be considered as the only solution for airports.
    Keywords: airport industry; two-sided markets
    JEL: C32 L93
    Date: 2015–06
  4. By: Spiros Bougheas (Department of Economics, University of Nottingham.); Jeroen Nieboer (Department of Social Policy, London School of Economics and Political Science); Martin Sefton (Department of Economics, University of Nottingham)
    Abstract: We report a controlled laboratory experiment examining risk-taking and information aggregation in groups facing a common risk. The experiment allows us to examine how subjects respond to new information, in the form of both privately observed signals and signals reported from others. We find that a considerable number of subjects exhibit ‘reverse confirmation bias’: they place less weight on information from others that agrees with their private signal and more weight on conflicting information. We also find a striking degree of consensus when subjects make decisions on behalf of the group under a random dictatorship procedure. Reverse confirmation bias and the incidence of consensus are considerably reduced when group members can share signals but not communicate.
    Keywords: Group behavior; Teams; Decision Making; Risk; Experiment
    Date: 2015–07
  5. By: Ziv Hellman (Bar-Ilan University); Ron Peretz (London School of Economics)
    Abstract: We suppose that players in a cooperative game are located within a graph structure, such as a social network or supply route, that limits coalition formation to coalitions along connected subsets within the graph. This in turn leads to a more general study of coalitional games in which there are arbitrary limitations on the collections of coalitions that may be formed. Within this context we define a generalisation of the Shapley value that is studied from an axiomatic perspective. The resulting ‘graph value’ (and ‘S-value’ in the general case) is endogenously asymmetric, with the automorphism group of the graph playing a crucial role in determining the relative values of players.
    Keywords: Shapley value, network games
    JEL: C71 D46 D72
    Date: 2015–04
  6. By: Youjin Hahn; Asadul Islam; Eleonora Patacchini; Yves Zenou
    Abstract: We study the relationship between network centrality and educational outcomes using a field experiment in primary schools in Bangladesh. After obtaining information on friendship networks, we randomly allocate students into groups and give them individual and group assignments. We find that the groups that perform the best are those whose members have high Katz-Bonacich and key-player centralities. Leaders are mostly responsible for this effect, while bad apples have little influence. Group members’ network centrality is also important in shaping individual performance. We show that network centrality captures non-cognitive skills, especially patience and competitiveness.
    Keywords: Network centrality, team work, leaders, soft skills
    JEL: A14 C93 D01 I20
    Date: 2015–05
  7. By: Daniele Nosenzo (Department of Economics, University of Nottingham.); Fabio Tufano (Department of Economics, University of Nottingham.)
    Abstract: We study the effects of voluntary participation on public good provision. Voluntary participation may foster cooperation through two mechanisms: an entry mechanism, which leads to assortative selection of interaction partners, or an exit mechanism, whereby the opportunity to leave the partnership can be used as a means to resist exploitation by free-riders. We examine the relative effectiveness of these two mechanisms in a one-shot, two-person public goods game experiment. We find that voluntary participation has a positive effect on public good provision through the exit mechanism, but we do not find evidence of a positive effect of entry. Assortative selection of interaction partners seems to play a minor role in our setting, whereas the threat of costly exit is a powerful force to discipline free-riding.
    Keywords: public goods; cooperation; voluntary participation; exit; entry; experiment
    Date: 2015–04
  8. By: Raffo López Leonardo
    Abstract: This article presents a theoretical model to explain the performance of illicit drug markets. The analytical framework is based on the oligopoly model of Poret and Téjedo (2006), but the latter is extended in a crucial respect: the influence of drug trafficking networks in the illicit drug markets is considered. The proposed model indicates that Poret and Téjedo were correct: the aggregate quantity of drugs sold is negatively affected by the intensity of the law enforcement policies applied and positively affected by the number of traffickers in the market. We also determined that the individual and aggregate sales in the market are positively affected by the network’s average density. Our model is useful for explaining the failure of the war against drugs to halt the reproduction and expansion of illegal activities at a global level during the three past decades.
    Keywords: drug trafficking, illegal markets, law enforcement, social networks, gametheory, oligopoly
    JEL: K42 D43 L13 C72 D85
    Date: 2015–05–01
  9. By: Norbert Agbeko
    Abstract: The key characteristic of a true free market economy is that exchanges are entirely voluntary. When there is a monopoly in the creation of currency as we have in today's markets, you no longer have a true free market. Features of the current economic system such as central banking and taxation would be nonexistent in a free market. This paper examines how currency monopoly leads to the instabilities and imbalances that we see in today's economy. It also proposes that currencies should emerge from the voluntary exchange of goods and services, and studies economic interaction across all scales, by considering economic action in cases where the self-interests of individuals are coincident. By examining the voluntary exchange of goods and services at the scale of an entire society, it is shown that a new currency system, which resolves a lot of the problems caused by the current fiat currency system, emerges naturally from the free market. The new currency system is robust and efficient, and provides a way for public goods and services to be provided, and its providers compensated, without the need for direct taxation.
    Date: 2015–06

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