|
on Network Economics |
| By: | Pierre Andreoletti (MAPMO - Mathématiques - Analyse, Probabilités, Modélisation - Orléans - CNRS - UO - Université d'Orléans); Pierre Gaze (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans); Maxime Menuet (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans) |
| Abstract: | We model a specific two-sided monopoly market in which agents can switch from a side to the other. We define two periods of time. In the first period, agents buy the platform services on each side and in the second period of time, they can possibly enhance their satisfaction by going to the other face of the platform. We analyze the link between mobility, consumer’s utility, prices and profit. We show that mobility is a valuable feature which can be compared with an increase of product quality. Finally, the firm is able to capture the mobility in its monopoly’s profit. The relative size of each group then appears as a strategical variable for the firm. |
| Keywords: | externalities,side-switching,two-sided markets |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01206576&r=all |
| By: | Guillaume Burghouwt; Pablo Mendes De Leon; Jaap De Wit |
| Abstract: | The stepwise liberalisation of the EU internal aviation market resulted in 1993 in an open internal market that generated a series of supply side responses, which are partly comparable with the changes demonstrated in the deregulated US domestic air transport market. However, the starting point was quite different between these two markets. For example, until the deregulation in 1978, US legacy carriers operated a domestic crisscross network whereas the two flag carriers, Pan Am and TWA operated at various US gateways in stand-alone international networks based on the bilateral air service agreements concluded between the US and other states. After the deregulation, domestic major carriers transformed their crisscross domestic networks into radial hub and spoke networks (except the Delta hub at Atlanta that already existed before the deregulation). The domestic hubs in these networks also became the launching platforms for international operations when these domestic major carriers started to use their domestic feed for international operations. All in all, the former domestic major carriers became the new flag carriers in international markets, whereas the former two flag carriers went bankrupt due to the lack of domestic feed in order to adequately compete with these new internationally operating airlines. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaab:2015/4-en&r=all |
| By: | Cremer, Helmuth; Pestieau, Pierre; Roeder, Kerstin |
| Abstract: | This paper studies the design of a social long-term care (LTC) insurance when altruism is two-sided. The laissez-faire solution is not efficient, unless there is perfect altruism. Under full information, the rst-best can be decentralized by a linear subsidy on informal aid, a linear tax on bequests when the parent is dependent and state specic lump-sum transfers which provide insurance. We also study a second-best scheme comprising a LTC benet, a payroll tax on childrens earnings and an inheritance tax. This scheme redistributes resources across individuals and between the states of nature and the tax on childrens labor enhances informal care to compensate for the childrens possible less than full altruism. |
| Keywords: | Long-term care, Two-sided altruism |
| JEL: | H2 H5 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:29576&r=all |
| By: | Edward L. Glaeser; Giacomo A. M. Ponzetto; Yimei Zou |
| Abstract: | Should China build mega-cities or a network of linked middle-sized metropolises? Can Europe’s mid-sized cities compete with global agglomeration by forging stronger inter-urban links? This paper examines these questions within a model of recombinant growth and endogenous local amenities. Three primary factors determine the trade-o¤ between networks and big cities: local returns to scale in innovation, the elasticity of housing supply, and the importance of local amenities. Even if there are global increasing returns, the returns to local scale in innovation may be decreasing, and that makes networks more appealing than mega-cities. Inelastic housing supply makes it harder to supply more space in dense con…fines, which perhaps explains why networks are more popular in regulated Europe than in the American Sunbelt. Larger cities can dominate networks because of amenities, as long as the benefits of scale overwhelm the downsides of density. In our framework, the skilled are more likely to prefer mega-cities than the less skilled, and the long-run benefits of either mega-cities or networks may be quite different from the short-run benefits. |
| Keywords: | cities, Networks, growth, Migration |
| JEL: | R10 R58 F15 O18 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:841&r=all |
| By: | De Bruyckere, Valerie |
| Abstract: | This paper presents a methodology to calculate the Systemic Risk Ranking of financial institutions in the European banking sector using publicly available information. The pro- posed model makes use of the network structure of financial institutions by including the stock return series of all listed banks in the financial system. Furthermore, a wide set of common risk factors (macroeconomic risk factors, sovereign risk, financial risk and housing price risk) is included to allow these factors to affect the banks. The model uses Bayesian Model Averaging (BMA) of Locally Weighted Regression models (LOESS), i.e. BMA-LOESS. The network structure of the financial sector is analysed by computing measures of network centrality (degree, closeness and betweenness) and it is shown that this information can be used to provide measures of the systemic importance of institutions. Using data from 2005 (2nd quarter) to 2013 (3rd quarter), this paper provides further insight into the time-varying importance of risk factors and it is shown that the model produces superior conditional out-of-sample forecasts (i.e. projections) than a classical linear Bayesian multi-factor model. JEL Classification: C52, C58, G15, G21 |
| Keywords: | bank stock returns, Bayesian model averaging, financial networks, locally weighted regression, systemic risk |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20151848&r=all |
| By: | Chen, Ying-Ju; Zenou, Yves; Zhou, Junjie |
| Abstract: | We study pricing strategies of competing firms who sell heterogeneous products to a group of customers in a social network. Goods are substitutes and each customer gains network externalities from her neighbors who consume the same products. We show that there is a unique subgame-perfect equilibrium where, first, firms choose the prices of each good for each consumer, and, then, individuals decide their consumption of the goods. We also fully characterize the equilibrium prices for any network structure, and relate these equilibrium outcomes to the familiar Katz-Bonacich network centrality measures. Contrary to the monopoly case, the equilibrium price of a customer not only depends on her own characteristics but also on others' characteristics. We show that firms price discriminate and charge lower prices to more central consumers. This means that more central consumers obtain a larger discount because of their impact in terms of consumption on their neighbors. We also show that the firms' equilibrium profits can decrease when either the network becomes denser or network effects are higher. |
| Keywords: | competition; differentiated products; pricing; social networks |
| JEL: | D43 D85 L13 L14 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10857&r=all |
| By: | Tam\'as Fleiner; Zsuzsanna Jank\'o; Akihisa Tamura; Alexander Teytelboym |
| Abstract: | We consider general networks of bilateral contracts that include supply chains. We define a new stability concept, called trail stability, and show that any network of bilateral contracts has a trail-stable outcome whenever agents' preferences satisfy full substitutability. Trail stability is a natural extension of chain stability, but is a stronger solution concept in general contract networks. Trail-stable outcomes are not immune to deviations of arbitrary sets of firms. In fact, we show that outcomes satisfying an even more demanding stability property -- full trail stability -- always exist. We pin down conditions under which trail-stable and fully trail-stable outcomes have a lattice structure. We then completely describe the relationships between all stability concepts. When contracts specify trades and prices, we also show that competitive equilibrium exists in networked markets even in the absence of fully transferrable utility. The competitive equilibrium outcome is trail-stable. |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1510.01210&r=all |
| By: | Shaun Larcom; Ferdinand Rauch; Tim Willems |
| Abstract: | We estimate that a significant fraction of commuters on the London underground do not travel their optimal route. Consequently, a tube strike (which forced many commuters to experiment with new routes) taught commuters about the existence of superior journeys, bringing about lasting changes in behaviour. This effect is stronger for commuters who live in areas where the tube map is more distorted, thereby pointing towards the importance of informational imperfections. We argue that the information produced by the strike improved network-efficiency. Search costs are unlikely to explain the suboptimal behaviour. Instead, individuals seem to under-experiment in normal times, as a result of which constraints can be welfare-improving |
| Keywords: | Experimentation; learning; optimization; rationality; search |
| JEL: | D83 L91 R41 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:63832&r=all |
| By: | Christophe Bravard (Université Grenoble 2, UMR 1215 GAEL, F38000 Grenoble, France; CNRS, GATE Lyon-St Etienne, F-42000, France); Liza Charroin (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon Saint-Etienne, Ecully, F-69130, France; Université Lyon 2, Lyon, F-69007, France) |
| 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. |
| Keywords: | Networks, Network defense, Network design, Attacks on links |
| JEL: | D74 D85 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1519&r=all |