nep-net New Economics Papers
on Network Economics
Issue of 2016‒02‒29
fifteen papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Complement and Network Externalisties in the Mobile Devices Industry By Gyu, Lim Yeon; Taek, Kim Sang
  2. The impact of network competition in the mobile industry By Houpis, George; Rodriguez, Jose Maria; Ovington, Thomas; Serdarevic, Goran
  3. Competition in Telecommunications and Internet Services: Problems with Asymmetric Regulations By Paul J.J. Welfens
  4. Ultra-Broadband For All In Europe: Can Access Regulation Hinder Innovation And Welfare Maximisation? By Amendola, Giovanni Battista
  5. Optimal Number of Firms in the Wireless Markets By Jeanjean, François; Houngbonon, Georges Vivien
  6. Keeping up with the e-Joneses: Do online social networks raise social comparisons? By Sabatini, Fabio; Sarracino, Francesco
  7. A model of belief influence in large social networks By Antonio Jiménez-Martínez
  8. Small world of inter-firm network and firm's acquisition behaviour By Shreya Biswas
  9. The Joint Influencing Mechanism of Proximities and Knowledge Base on Multinational Companies’ Global Innovation Networks By Liu , Ju; Liefner , Ingo
  10. Analysis of the role of international network effects on the diffusion of second and third generation mobile communication networks By Baquero, Maria; Kuroda, Toshifumi
  11. Endogenous market making and network formation By Briana Chang; Shengxing Zhang
  12. Content providers and co-investment in broadband networks By Anna D'Annunzio; Pierfrancesco Reverberi
  13. Endogenous correlated network dynamics By Rui Gong; Frank Page; Myrna Wooders
  14. Structuration processes in complex dynamic systems - an overview and reassessment By Gräbner, Claudius; Heinrich, Torsten; Kudic, Muhamed
  15. Study of the potential impact of Quality-of-Experience based services on Net Neutrality principles By Martinez, Luis; Alvarez, Oscar Alvarez; Markendahl, Jan

  1. By: Gyu, Lim Yeon; Taek, Kim Sang
    Keywords: Hotelling Model,Transportation Cost,Complement Goods,Mobile Devices
    Date: 2015
  2. By: Houpis, George; Rodriguez, Jose Maria; Ovington, Thomas; Serdarevic, Goran
    Abstract: In 2000, there were as many countries served by a single mobile network as by network competition. Today, only 30 countries, representing less than 3% of the world’s population, are served by a single network. There has been considerable discussion about the optimal number of network operators in the mobile industry. More recently, some regulators and governments have considered implementing a single wholesale network to deliver next generation mobile services due to concerns around low coverage, inefficient duplication of costs and lack of competition. To date, the authors are not aware of such single wholesale networks fully implemented in mobile industry. What is clear is that single wholesale networks represent a U-turn with respect the way in which the mobile industry has developed worldwide. Therefore, it is important to carefully examine the available evidence on the performance of mobile markets in countries with a single mobile networks, as this is could shed some light on the expected performance of single wholesale networks. The key result is that countries with network competition have higher coverage, higher take-up and greater innovation than countries with a single mobile network, controlling for other relevant factors. This paper represents a significant contribution to the literature, as the authors are not aware of any other papers that have considered the impact of network competition compared to single networks on outcomes such as coverage. The results of the paper have significant policy implications, as they imply that moving away from the network competition model into the world of single wholesale networks could cause considerable consumer harm, which may be difficult to reverse once there has been a move away from network competition.
    Keywords: regulation,single mobile network,competition,mobile telecommunications
    Date: 2015
  3. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: With the digital convergence of internet services markets and telecommunications markets, the issue of a common, consistent regulation has become more important. While Google or Facebook can exploit knowledge about the content of “data mails” or SMS, data protection rules for telecommunication operators are different – they cannot use info about “structural content” and are thus unable to generate high revenues from advertising that is based on knowledge about structural content. Internet service providers thus can cross-subsidize digital communication services and thereby gain market shares - based on cross-subsidization - in traditional telecommunication markets. Thus there is a fundamental inconsistency of regulations for internet service providers and telecommunication operators which should be remedied by new global rules for the emerging global communications market. The EU and the US, as well as other countries, plus the ITU should launch a joint initiative in order to create a global level playing field.
    Keywords: Internet services, Telecommunication, Regulation, Digital global markets
    JEL: L86 L96 L98
    Date: 2014–12
  4. By: Amendola, Giovanni Battista
    Abstract: Most of the European countries risk not reaching the 2020 Digital Agenda for Europe (DAE) targets. In order to achieve these targets, private investments in ultra-broadband networks should be vigorously promoted by access regulation whilst the deployment of ultra-broadband networks in unprofitable areas should be subsidized by means of appropriate public funding. Fiber to the Cabinet (FTTC) is considered a key technology in order to reach the 2020 DAE targets. This deployment model is widely adopted in a number of countries including, among others, Germany, the UK and Italy. The paper addresses FTTC regulation both at national and local level, that is in geographic areas subsidized by State aids. First, it emerges a clear trade-off at national level between the goal of infrastructure-based competition at the cabinet level and the achievement of the 2020 DAE targets. Inappropriate access regulation may indeed jeopardize the 2020 DAE targets by decreasing private investors’ incentives to roll out FTTC networks, as well as to deploy new technologies such as Vectoring. Access regulation may thus, rather paradoxically, increase the amount of State aid funding which is required in a given country to meet the 2020 DAE targets. Second, excessive access obligations in geographies subsidized by State aids can also substantially increase State aid funding and, thus, undermine the capability of a given country to reach the 2020 DAE targets.
    Date: 2015
  5. By: Jeanjean, François; Houngbonon, Georges Vivien
    Abstract: In this paper, we design a theoretical model to analyze the impact of the number of firms on investment in the wireless communications industry. Our model extends the Salop’s framework by introducing investment in quality that either reduces the marginal cost of production or shifts the consumers’ valuation upward. We find that an increase in the number of firms reduces their incentives to invest in quality. The impact on the aggregate industry investment can be non-monotone. These theoretical findings are supported by empirical evidence from the mobile telecommunications industry. More specifically, we find that mobile operators’ investment in network infrastructure is not affected when going from two to three firms; but decreases above three firms. In addition, there is an inverted-U relationship between the industry investment and the number of mobile operators; the maximum being reached at three or four mobile operators.
    Keywords: Market structure,Investment,Mobile Telecommunications
    JEL: D21 D22 L13 L40
    Date: 2015
  6. By: Sabatini, Fabio; Sarracino, Francesco
    Abstract: Online social networks, such as Facebook, disclose an unprecedented volume of personal information amplifying the occasions for social comparisons, which are a source of frustration. We test the hypothesis that the use of social networking sites (SNS) increases social comparisons as proxied by people’s dissatisfaction with their income. After controlling for the possibility of reverse causality, our results suggest that SNS users have a higher probability to compare their achievements with those of others. We conclude that SNS can be a strong engine of frustration for their users.
    Keywords: social networks; social networking sites; social comparisons; satisfaction with income; relative deprivation.
    JEL: D83 I31 O33 Z1 Z13
    Date: 2016–02–03
  7. By: Antonio Jiménez-Martínez (Division of Economics, CIDE)
    Abstract: This paper develops a model of evolution of beliefs through communication in an exogenous social network. We assume that the agents are Bayesian updaters and that the network enables them to listen to the opinion of others about some uncertain parameter of interest. We explore the effects of the network on the agents' long-run first-order beliefs about the parameter and investigate the aggregation of private information in large societies. Each agent observes private signals about the value of the unknown parameter and, according to his connections in the network, receives private messages from others as well. A message conveys some information about the signal observed by the sender and about the messages that the sender receives from other indirectly connected agents. The informativeness of a message is not strategically chosen but it is exogenously given by the intensity of the connection. Both signals and messages are independent and identically distributed across time but not necessarily across agents. We first characterize the long-run behavior of an agent's beliefs in terms of some entropy-based measures of the conditional distributions of signals and messages available to the agent. Then, we show that the achievement of a consensus in the society is closely related to the presence of prominent agents who are able to change the evolution of other agents' opinions over time. Finally, we show that the influence of the prominent agents must not be very high in order for the agents to aggregate correctly their private sources of information in the long-run.
    Keywords: Communication networks, Bayesian updating, private signals, private messages, consensus, correct limiting beliefs
    JEL: D82 D83 D85
    Date: 2014–04
  8. By: Shreya Biswas (Indira Gandhi Institute of Development Research)
    Abstract: This study finds that the inter-firm network in India on account of director interlocks is a small world and the network has become more integrated since the introduction of corporate governance regulations in the country. Using a sample of National Stock Exchange listed firms in India the study finds a negative relation between average path length and probability of acquiring indicating the importance of faster reach of information among the firms within the network. The paper also finds a non-linear relation given by inverted U-shaped curve between firm level clustering and probability of acquiring. Initially, increase in clustering has a positive effect through the informational quality effect; however at higher levels the negative informational redundancy effect dominates leading to a curvilinear relation.
    Keywords: Corporate governance, Small-world, Director interlocks, Inter-firm network
    JEL: G32 G34 G38 M21 Z13
    Date: 2016–01
  9. By: Liu , Ju (CIRCLE, Lund University); Liefner , Ingo (Department of Economic Geography, Justus Liebig University Giessen)
    Abstract: This paper explores the joint influencing mechanism of the two-dimensional proximity, namely geographical and organisational proximity, and knowledge base on the relational pattern of multinational companies’ (MNCs) global innovation networks (GINs). It argues when it comes to MNCs’ GINs, the conventional geographical-proximity-and-knowledge-base framework allows only for an incomplete understanding of the network relational patterns and particularly the observed differences between different GINs. The paper suggests an extended theoretical framework based on a two-dimensional proximity concept and the knowledge base approach for understanding how and why MNCs’ GINs are organised in specifically different ways. An in-depth comparative case study with social network analysis is used to illustrate the applicability of the framework in question.
    Keywords: global innovation network; Multinational company; Knowledge base; Geographical proximity; Organisational proximity; Social network analysis
    JEL: F23 L60 M16 O32
    Date: 2016–01–18
  10. By: Baquero, Maria; Kuroda, Toshifumi
    Abstract: Using quarterly data of 58 countries, this paper provides empirical evidence that mobile phone diffusion from 2007 to 2009 is positively influenced by international network effects. Direct and indirect network effects are a result of the international standadization of telecommunication technologies, which allows consumers in a given country to benefit from other countries' networks by using international roaming services or imported handsets. We define international network effects as the installed base of mobile phone subscribers in countries different than the home country which use the same technology, weighted by various distance metrics. (geographic distance, trade value of mobile handsets and number of personal travelers between the home country and the partner countries.) To measure international network effects, we estimate a series of differentiated-products demand-system models of mobile phones by technology standard with international network effects. To overcome the endogeneity of mobile service price and international network effects, we propose two new instrumental variables (IV). In addition, we test if the impact on mobile phone diffusion differs whether technologies are local or global standards, or whether they are backward/formard-combatible. Based on our findings, we conclude that the large network effects of GSM (Global System for Mobile Communications) technology prevent the diffusion of third generation (3G) mobile phones. We show that the high 3G diffusion rates in Japan and Korea are not driven by state-of-the-art technology or high consumer preference, but by the absence of the GSM standard. Finally, to assess teh effect of technology choice on welfare in Japan, we conduct a counterfactual analysis an demonstrate thar if the GSM technology was introduced in Japan, it would increase Japanese monthly per-consumer surplus from $94.2 to $188.
    Keywords: Cellular telephony,Diffusion,Global standards,Network effect
    JEL: L15 L96 F10
    Date: 2015
  11. By: Briana Chang; Shengxing Zhang
    Abstract: This paper proposes a theory of intermediation in which intermediaries emerge endogenously as the choice of agents. In contrast to the previous trading models based on random matching or exogenous networks, we allow traders to explicitly choose their trading partners as well as the number of trading links in a dynamic framework. We show that traders with higher trading needs optimally choose to match with traders with lower needs for trade, and they build fewer links in equilibrium. As a result, traders with the least trading need turn out to be the most connected and have the highest gross trade volume. The model therefore endogenously generates a core-periphery trading network that we often observe: a financial architecture that involves a small number of large, interconnected institutions. We use this framework to study bid-ask spreads, trading volume, asset allocation.
    Keywords: over-the-counter market; core-periphery trading network; matching; intermediation
    JEL: C70 G1 G20
    Date: 2015–11
  12. By: Anna D'Annunzio (Telenor Research, Snar¿yveien 30, 1360 Fornebu, Norway); Pierfrancesco Reverberi (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")
    Abstract: In many countries, Next Generation Access networks (NGA) deployment and penetration rate proceed at a slower pace than expected. We argue that an ex ante contractual arrangement among access Internet Service Providers (ISPs) and Content Providers (CPs), which builds on the complementarity between infrastructure and content, can promote the roll out of NGA. Different from co-investment of ISPs, and from incentive policies based on access regulation, one such contract brings down the investment cost for the telecom industry, promotes end users' demand for improved connectivity, and internalizes investment externalities. We then study how the regulatory regime of the Internet affects firms' investment incentives. Using a simple model, we show that a departure from network neutrality, which allows the access ISP to negotiate with the CP a fee for priority delivery of content, has ambiguous effects on infrastructure investment. The ISP's and the CP's incentives to (co)-invest in NGA depend on the cost of investment and the CP's bargaining power ex post (when investment is sunk).
    Keywords: Next Generation Access networks ; Investment under uncertainty ; Ex-ante and ex-post contracts ; Network neutrality ; Co-investment
    Date: 2015
  13. By: Rui Gong; Frank Page; Myrna Wooders
    Abstract: We model the structure and strategy of social interactions prevailing at any point in time as a directed network and we address the following open question in the theory of social and economic network formation: given the rules of network and coalition formation, preferences of individuals over networks, strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emerge and persist. Our main contributions are to formulate the problem of network and coalition formation as a dynamic, stochastic game and to show that: (i) the game possesses a correlated stationary Markov equilibrium (in network and coalition formation strategies), (ii) together with the trembles of nature, this correlated stationary equilibrium determines an equilibrium Markov process of network and coalition formation, and (iii) this endogenous Markov process possesses a finite set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. Moreover, we extend to the setting of endogenous Markov dynamics the notions of pairwise stability (Jackson-Wolinsky, 1996) and the path dominance core (Page-Wooders, 2009a). We show that in order for any network-coalition pair to emerge and persist, it is necessary that the pair reside in one of finitely many basins of attraction. The results we obtain here for endogenous network dynamics and stochastic basins of attraction are the dynamic analogs of our earlier results on endogenous network formation and strategic basins of attraction in static, abstract games of network formation (Page and Wooders, 2009a), and build on the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005).
    Keywords: endogenous network dynamics; dynamic stochastic games of network formation; stationary Markov correlated equilibrium; equilibrium Markov process of network formation; basins of attraction; Harris decomposition; ergodic probability measures; dynamic path dominance core; dynamic pairwise stability
    JEL: A14 C71 C72
    Date: 2015–06
  14. By: Gräbner, Claudius; Heinrich, Torsten; Kudic, Muhamed
    Abstract: Many questions addressing the emergence and dynamics of economic networks are still unresolved, especially regarding dynamics on and of networks. Previous research shows that processes at the micro-level affect socio-economic systems at aggregated levels. These insights facilitated the development of models taking the network structure explicitly into account. However, what is still missing is a systemic network theory that considers the full complexity of socio-economic systems. We argue that sociological, economic and institutional theories are complementary in many respects and have the potential to fill this gap by providing the theoretical ground for an eclectic network theory. In this paper, we address key concepts that are concerned with structuration processes in socio-economic networks, review and reassess the literature in this field and discuss approaches to explain pattern formation processes at higher aggregation levels. We propose to take advantage of the complementarities of the above outlined yet unconnected research programs.
    Keywords: complex systems; innovation networks; structuration processes; network dynamics; evolutionary economics
    JEL: D85 L14 O31 O33
    Date: 2016–01–25
  15. By: Martinez, Luis; Alvarez, Oscar Alvarez; Markendahl, Jan
    Date: 2015

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