nep-net New Economics Papers
on Network Economics
Issue of 2015‒10‒04
eleven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. A Fine Rule From a Brutish World? An Experiment on Endogenous Punishment Institution and Trust By H. Sun; M. Bigoni
  2. The impact of Online Social Network’ usage on the purchase decision process: Quantitative and Qualitative stud By Amel GRAA; Soumia ABDELHAK; Hayat BARAKA
  3. Movers and Shakers By Robert Akerlof Author-1-Name-First: Robert Author-1-Name-Last: Akerlof; Richard Holden Author-2-Name-First: Richard Author-2-Name-Last: Holden
  4. The spatial component of R&D networks By Tobias Scholl; Antonios Garas; Frank Schweitzer
  5. Value Creation in Software Service Platforms By Netsanet Haile; Jorn Altmann
  6. R&D networks and regional knowledge production in Europe. Evidence from a space-time model By Iris Wanzenböck; Philipp Piribauer
  7. Payoff Equivalence of Efficient Mechanisms in Large Matching Markets By Yeon-Koo Che; Olivier Tercieux
  8. An Experimental Study of Uncertainty in Coordination Games By Ioannou, Christos A.; Makris, Miltiadis
  9. Networks, Frictions, and Price Dispersion By Donna, Javier; Schenone, Pablo; Veramendi, Gregory
  10. Network Centrality and Market Prices. An Empirical Note By Matthias Firgo; Dieter Pennerstorfer; Christoph R. Weiss
  11. Network Price Identity By Arnaud Dragicevic; Ahmed Barkaoui

  1. By: H. Sun; M. Bigoni
    Abstract: By means of a laboratory experiment, we study the impact of the endogenous adoption of a collective punishment mechanism within a one-shot binary trust game. The experiment comprises three games. In the first one, the only equilibrium strategy is not to trust, and not to reciprocate. In the second we exogenously introduce a sanctioning rule that imposes on untrustworthy second-movers a penalty proportional to the number of those who reciprocate trust. This generates a second equilibrium where everybody trusts and reciprocates. In the third game, the collective punishment mechanism is adopted through majority-voting. In line with the theory, we find that the exogenous introduction of the punishment mechanism significantly increases trustworthiness, and to a lesser extent also trust. However, in the third game the majority of subjects vote against it: subjects seem to be unable to endogenously adopt an institution which, when exogenously imposed, proves to be efficiency enhancing.
    JEL: C72 C92 D72
    Date: 2015–09
  2. By: Amel GRAA (Djilali Liabes University); Soumia ABDELHAK (Djilali Liabes University); Hayat BARAKA (Djilali Liabes University)
    Abstract: The main goal of this research has to show how online social networks (ONS) influence the consumers’ purchase decisions. Our efforts to study empirically the online social network’ usage and its impact on the purchase decision process might account for the important frequency of the access of this tool led to the employ of both qualitative and quantitative data collection techniques. We present a quantitative research including descriptive method on the use of ONS by 187 students from Sidi Bel Abbes University (Algeria). Data analysis has been done by using Sphinx V5 computer software. Results indicate that Facebook is the most popular site. The results also demonstrate that the students engage with social media platform daily and they spend between one to four hours. The other method of the research has been qualitative which 13 students have been interviewed as users of online social network for mainly identifying the stage where social media has interfered in the consumer decision making process. The results of this research highlight that the OSN is an important tool for information search stage, in which is influenced by the level and direction of purchase decision. The findings offer insight into consumers’ behavior in brand communities and into the prospects of social media being a viable sales and communication channel to companies. As a future research direction, authors suggest studying the OSN post-experience.
    Keywords: Online social networks, Purchase decision, Qualitative research, Students, Algeria.
    JEL: M31
  3. By: Robert Akerlof Author-1-Name-First: Robert Author-1-Name-Last: Akerlof (University of Warwick); Richard Holden Author-2-Name-First: Richard Author-2-Name-Last: Holden (UNSW Australia Business School)
    Abstract: Most projects, in most walks of life, require the participation of multiple parties. While it is difficult to unite individuals in a common endeavor, some people, whom we call “movers and shakers,” seem able to do it. The paper specifically examines moving and shaking of an investment project. We analyze a model with two types of agents: managers and investors. Managers and investors initially form social connections. Managers then bid to buy control of the project, and the winning bidder puts effort into raising awareness of the project among investors. Investors who become aware receive private signals of the project’s quality. Finally, they choose whether to invest in the project, whose return is a function both of its quality and aggregate investment. We characterize the equilibrium of this game, including the endogenously formed network structure and payoffs. We show that, while managers are identical ex ante, a single manager emerges as most connected; these connections confer the ability to increase aggregate investment (i.e., “move and shake” the project); he consequently earns a rent. In extensions, we move away from the assumption of ex ante identical managers to highlight various forces that lead one manager or another to become a mover and shaker. Finally, we explore various applications, including: entrepreneurship, funds management, and seed capital.
    Keywords: Global games, investment, network capital.
    JEL: D85 D20
    Date: 2015–09
  4. By: Tobias Scholl; Antonios Garas; Frank Schweitzer
    Abstract: We study the role of geography in R&D networks by means of a quantitative, micro-geographic approach. Using a large database that covers international R&D collaborations from 1984 to 2009, we localize each actor precisely in space through its latitude and longitude. This allows us to analyze the R&D network at all geographic scales simultaneously. Our empirical results show that despite the high importance of the city level, transnational R&D collaborations at large distances are much more frequent than expected from similar networks. This provides evidence for the ambiguity of distance in economic cooperation which is also suggested by the existing literature. In addition we test whether the hypothesis of local buzz and global pipelines applies to the observed R&D network by calculating well-defined metrics from network theory.
    Date: 2015–09
  5. By: Netsanet Haile (Technology Management, Economics, and Policy Program, College of Engineering, Seoul National University); Jorn Altmann (Technology Management, Economics, and Policy Program, College of Engineering, Seoul National University)
    Abstract: In order to benefit from operating an IT service platform (e.g., SaaS platform), platform providers need to find a way to keep their existing users and application services active sources of value. However, the understanding of how to achieve that is limited due to the newness of this kind of business. This paper investigates whether all stakeholders of the platform ecosystem can generate sufficient value when participating in the platform. As stakeholders, we consider application service users, service developers, and service platform providers. We also analyze the interrelationship between these stakeholders. The analysis outcome is a value creation model that allows the calculation of the stakeholders’ values. The model also helps inferring the relative impact of different factors on the evolution of values of the software service platform stakeholders. Our simulation results confirm that all stakeholders of a service platform mainly benefit from a growing installed base of application users. However, in a mature market, a large service variety mainly benefits the service platform provider, while the other stakeholders obtain a reduced increase in their benefits. In particular, the utility growth of application users becomes constrained as the benefit from new connections with other users decreases and the number of new services used decreases. Similarly, the revenue of service developer decreases, making service development less profitable. Therefore, we can state that not only a large fraction of the value creation goes to the platform provider but also that the software service ecosystem can collapse, if no mutually beneficial pricing of services is implemented.
    Keywords: SaaS and PaaS Platform, Value Creation, Value Distribution Model, Two-Sided Network Effect, Business Modeling, Software Business, Cloud Computing, Software Ecosystem, Software Services.
    JEL: C15 C44 C61 D01 D02 D11 D46 L11 L15 L86 M15 M21
    Date: 2015–09
  6. By: Iris Wanzenböck (Innovation Systems Department, Austrian Institute of Technology); Philipp Piribauer (Department of Economics, Vienna University of Economics and Business)
    Abstract: In this paper we estimate space-time impacts of the embeddedness in R&D networks on regional knowledge production by means of a dynamic spatial panel data model with non-linear effects for a set of 229 European NUTS-2 regions in the period 1999-2009. Embeddedness refers to the positioning in networks where nodes represent regions that are linked by joint R&D endeavours in European Framework Programmes. We observe positive immediate impacts on regional knowledge production arising from increased embeddedness in EU funded R&D networks, in particular for regions with lower own knowledge endowments. However, long-term impacts of R&D network embeddedness are comparatively small.
    Keywords: R&D networks, European Framework Programme, regional knowledge production, dynamic spatial panel data model, space-time impacts
    JEL: C33 O31 R12
    Date: 2015–09
  7. By: Yeon-Koo Che (Dept. of Economics, Columbia University); Olivier Tercieux (Dept. of Economics, Paris School of Economics)
    Abstract: We study Pareto efficient mechanisms in matching markets when the number of agents is large and individual preferences are randomly drawn from a class of distributions, allowing for both common and idiosyncratic shocks. We show that, as the market grows large, all Pareto efficient mechanisms -- including top trading cycles, serial dictatorship, and their randomized variants -- are uniformly asymptotically payoff equivalent “up to the renaming of agents,” yielding the utilitarian upper bound in the limit. This result implies that, when the conditions of our model are met, policy makers need not discriminate among Pareto efficient mechanisms based on the aggregate payoff distribution of participants.
    Keywords: Large matching markets, Pareto efficiency, Payoff equivalence
    JEL: C70 D61 D63
    Date: 2015–07
  8. By: Ioannou, Christos A.; Makris, Miltiadis
    Abstract: Global games and Poisson games have been proposed to address equilibrium indeterminacy in Coordination games. The former assume that agents face idiosyncratic uncertainty about economic fundamentals to capture disperse information, whereas the latter model the number of actual players as a Poisson random variable to capture population uncertainty in large games. Given that their predictions differ, it is imperative to understand which type of uncertainty drives empirical behavior in macroeconomic environments with strategic complementarities. Recent experimental literature finds mixed results on whether subjects' behavior is similar in Global and Common Knowledge Coordination games, and hence on whether idiosyncratic uncertainty about economic fundamentals is an important determinant of subjects' behavior. Poisson Coordination games have not been investigated experimentally. We fill this gap. Our findings suggest that uncertainty about the number of actual players may influence subjects' behavior. Crucially, such behavior is consistent with the theoretical prediction of Poisson Coordination games.
    Date: 2015–09–23
  9. By: Donna, Javier; Schenone, Pablo; Veramendi, Gregory
    Abstract: This paper models frictions in buyer-seller markets using networks, where buyers are linked with a subset of sellers and sellers are linked with a subset of buyers. Sparser networks are associated with higher search frictions. We use the model to characterize pairwise stable allocations and their supporting prices. Our approach allows for network effects, where a buyer who is not linked to a seller affects the price obtained by that seller. Network effects generate the central finding of our paper: even relatively sparse networks lead to price distributions and allocations that are close to the perfectly competitive outcome where the law of one price holds. We then investigate the role of network effects in a dynamic setting by studying wages in the context of an on-the-job search model. We find two novel predictions relative to the search literature. Lowering frictions (so that workers receive job offers at a higher rate) leads to: (1) lower worker mobility and lower expected wage growth and (2) lower expected wages in markets with high unemployment. We argue that our framework is suited to the analysis of a wide range of real-world markets, such as the labor market and buyer-seller trading platforms like eBay or Amazon.
    Keywords: Networks; Matching; Auctions; Competition; Frictions; Price Dispersion
    JEL: C78 D44 J31 L00
    Date: 2015–07–17
  10. By: Matthias Firgo (WIFO); Dieter Pennerstorfer (WIFO); Christoph R. Weiss
    Abstract: We empirically investigate the importance of centrality (holding a central position in a spatial network) for strategic interaction in pricing for the Austrian retail gasoline market. Results from spatial autoregressive models suggest that the gasoline station located most closely to the market center – defined as the 1-median location – exerts the strongest effect on pricing decisions of other stations. We conclude that centrality influences firms' pricing behaviour and further find that the importance of centrality increases with market size.
    Keywords: Network Centrality, Spatial Competition, Retail Markets, Gasoline Prices
    Date: 2015–09–28
  11. By: Arnaud Dragicevic (Chaire Forêts pour Demain, AgroParisTech-Office National des Forêts); Ahmed Barkaoui (Laboratoire d'Economie Forestière, INRA - AgroParisTech)
    Abstract: We model a closed-loop network of agents distributed among subnetworks and study the conditions that satisfy the time-dependent stability of network connectedness in presence of random perturbations. We show that the evolutionary stability of the network structure depends on the prevalence of perturbations on between-subnetwork coupling. Our findings permit to unveil the conservation value of the topological structure, as well as to situate the Price theorem, both in its standard and expanded forms, in the context of network evolutionary variational identity. Whenever the dynamics deals with interconnected structures, the network-based framework is more suitable to address the questions that revolve around the stability of input-output systems.
    Keywords: bioeconomics, forest planning, mean-variance model, mixed-species forests, climate Change
    JEL: C61 C65 C67 L23 Q57
    Date: 2015–11

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