nep-net New Economics Papers
on Network Economics
Issue of 2015‒08‒25
nine papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Economic Features of the Internet and Network Neutrality By Nicholas Economides
  2. Optimal design and defense of networks under link attacks By Christophe Bravard; Liza Charroin
  3. A Noncooperative Model of Contest Network Formation By Kenan Huremovic
  4. Advertising Competition in the French Free-To-Air Television Broadcasting Industry By Ivaldi, Marc; Zhang, Jiekai
  5. Information-Revelation and Coordination Using Cheap Talk in a Game with Two-Sided Private Information By Ganguly, Chirantan; Ray, Indrajit
  6. Games Played on Networks By Yann Bramoullé; Rachel Kranton
  7. Trend-driven information cascades on random networks By Teruyoshi Kobayashi
  8. Alternative food networks and local markets: determinants of consumers’ choices between conventional and farmers’ stands By Novelli, Silvia; Corsi, Alessandro
  9. Does Anti-Diversification Pay? A One-Sided Matching Model of Microcredit By Thilo Klein

  1. By: Nicholas Economides (Stern School of Business, New York University. 44 West 4th Street, New York, NY 10012)
    Abstract: We discuss the issue of a possible abolition of network neutrality and the introduction of paid prioritization by residential broadband access networks.We show that, in short run analysis where bandwidth is fixed, and in the absence of congestion, network neutrality tends to maximize total surplus. When an ISP violates network neutrality and invests the extra profits to bandwidth expansion, the presence of more bandwidth alleviates the allocative distortion, and can even reverse it. We also discuss the network neutrality issue under the assumption of congestion, and characterize the set of utility functions for which network neutrality is optimal, as well as utility functions where it is optimal to prioritize. Finally, we review regulatory rules in the United States on network neutrality.
    Keywords: Internet, pricing, network neutrality, price discrimination, prioritization
    JEL: D43 L11 L1
    Date: 2015–04
  2. By: Christophe Bravard (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Institut national de la recherche agronomique (INRA) - Université Grenoble Alpes - Grenoble 2); Liza Charroin (UL2 - Université Lumière - Lyon 2, GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS)
    Abstract: Networks facilitate the exchange of goods and information and create benefits. We consider a network composed of complementary nodes, i.e., nodes that need to be connected to generate a positive payoff. This network may face intelligent attacks on links. To study how the network should be designed, we develop a strategic model, inspired by Dziubiński and Goyal (2013), with two players: a Designer and an Adversary. The Designer has two potential ways to defend her network: forming destructible links among the given set of nodes to increase connectivity or protecting a group of nodes (with indestructible links). Links formation and protections (indestructible links) are costly. The Adversary then allocates her resources to attack links. We examine two situations which differ according to the number of protections available to the Designer. Our main findings are that if the number of protections is not limited, the Designer should either protect all the nodes, or create a large number of (destructible) links to absorb the Adversary's attack; if the available number of protections is limited, then a strategy that uses protections and links can be the equilibrium.
    Date: 2015–07–16
  3. By: Kenan Huremovic (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université)
    Abstract: Network structure has a significant role in determining the outcomes of many socioeconomic 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.
    Date: 2015–02
  4. By: Ivaldi, Marc; Zhang, Jiekai
    Abstract: This paper investigates empirically the advertising competition in the French free TV broadcasting industry in a two-sided framework. We specify a structural model of oligopoly competition of free TVs, and identify the shape and magnitude of the feedback loop between the TV viewers and the advertisers using French market data from March 2008 to December 2013. We contribute to the literature by implementing a simple procedure to test the conduct of TV channels, and identify that the nature of competition is of Cournot type on the French TV advertising market. In line with a decision of French anti-trust authority in 2010 which authorized the acquisition of two free broadcasting TV channels by a big media group under behavioral remedies, a series of competitive analysis has been conducted: We find firstly that the surpls of TV viewers keep raising after the decision of acquisition, suggesting that the implemented policy has been efficient in protecting the consumer surplus; Then, we find, by counterfactual simulation, that the merger of advertising agencies would not affect importantly the equilibrium outcomes in this industry, due to the strong network externalities between the TV viewers and the advertisers.
    Keywords: advertising; behavioral remedies; competition; market conduct; media; TV; two-sided market
    JEL: D22 D43 K21 L11 L13 L22 L41 M37
    Date: 2015–08
  5. By: Ganguly, Chirantan; Ray, Indrajit (Cardiff Business School)
    Abstract: We consider a Bayesian game, namely the Battle of the Sexes with private information, in which each player has two types, High and Low. We allow cheap talk regarding players’ types before the game and prove that the unique fully revealing symmetric cheap talk equilibrium exists for a low range of prior probability of the High-type. This equilibrium has a desirable type-coordination property: it fully coordinates on the ex-post efficient pure Nash equilibrium when the players’ types are different. Type-coordination is also obtained in a partially revealing equilibrium in which only the High-type is not truthful, for a medium range of prior probability of the High-type.
    Keywords: Battle of the Sexes; Private Information; Cheap Talk; Coordination; Full Revelation
    JEL: C72
    Date: 2015–06
  6. By: Yann Bramoullé (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université); Rachel Kranton (Duke University, Department of Economics - Duke University (Durham, USA))
    Abstract: This chapter studies games played on fixed networks. These games capture a wide variety of economic settings including local public goods, peer effects, and technology adoption. We establish a common analytical framework to study a wide game class. We unearth new connections between games in the literature and in particular between those with binary actions, like coordination and best-shot games, and those with continuous actions and linear best replies. We review and advance existing results by showing how they tie together within the common framework. We discuss the game-theoretic underpinnings of key notions including Bonacich centrality, maximal independent sets, and the lowest and largest eigenvalue. We study the interplay of individual heterogeneity and the network and we develop a new notion - interdependence - to analyze how a shock to one agent affects the action of another agent. We outline directions for future research.
    Date: 2015–03
  7. By: Teruyoshi Kobayashi (Graduate School of Economics, Kobe University)
    Date: 2015–08
  8. By: Novelli, Silvia; Corsi, Alessandro
    Abstract: Direct purchases are a widespread and important typology of the so-called Alternative Food Networks. Within this channel, farmers’ markets represent a popular and deeply investigated farmer-to-consumer market segment. While farmers’ markets are a quite recent initiatives, it is traditional to find in many towns in Italy both conventional stands and farmers’ stands selling fruit and vegetables in the same district market. We therefore analyse the behavioural characteristics of local market consumers choosing to purchase from farmers in order to point out the determinants of their choice. The consumers’ preferences were assessed through an in-person survey. Data were collected interviewing consumers in open-air markets in Torino, Cuneo, Alessandria and Asti, four cities in Piedmont Region (Italy) where farmers sell their products. The determinants of the choice to buy from farm stands were analysed with a probit model using a final sample of 1,138 respondents. Explanatory variables comprise the consumers’ general attitudes towards the purchase of food (importance given to convenience, price, quality and trust) and their personal characteristics. Also, other variables were added in order to highlight the possible role of markets and areas with distinctive characteristics. The most important factor affecting consumers’ choice for farm stand is the quest for quality. Consumers with a strong interest in quality are significantly more likely to buy from farmers. Among the personal characteristics, being the household member in charge of buying fruits and vegetables, and education, are the main determinants of the choice of farmers’ stands. On the contrary, the effects of variables such as income and job skill level are not clear enough,and seem to be open to different interpretations.
    Keywords: Alternative Food Networks, direct purchase, consumers’ choices, Agricultural and Food Policy, D4, Q13,
    Date: 2015–06
  9. By: Thilo Klein
    Abstract: In many economic situations, market participation requires that agents form groups subject to exogenous rules. Consider a microfinance institution that decides on rules for diversifying borrower groups in terms of their exposure to income shocks. Such rules affect group repayment by influencing both who matches with whom (direct effect) and who participates in the market (participation). I develop the key trade-off for conflicting predictions of extant theoretical models and estimate both effects separately. Group formation creates an endogeneity problem, but a matching model exploits the exogenous variation from counterfactual groups. I find that while diversification has no participation effect it has a significant positive direct effect.
    Keywords: microcredit; joint liability risk; diversification; market design; stable matching; endogeneity; selection model; agriculture; Thailand
    JEL: C11 C31 C34 C36 C78 D02 D82 G21 O16 Q14
    Date: 2015–07–19

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