nep-net New Economics Papers
on Network Economics
Issue of 2016‒06‒14
five papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Tacit collusion and market concentration under network effects By Rupayan Pal; Marcella Scrimitore
  2. Homophily and Transitivity in Dynamic Network Formation By Bryan S. Graham
  3. Rent-seeking in elite networks By Haselmann, Rainer; Schoenherr, David; Vig, Vikrant
  4. An Economic Policy Perspective on Online Platforms By Bertin Martens
  5. Global production sharing: exploring Australia’s competitive edge By Prema-chandra Athukorala; Tala Talgaswatta; Omer Majeed

  1. By: Rupayan Pal (Indira Gandhi Institute of Development Research); Marcella Scrimitore (University of Salenta)
    Abstract: In an infnitely repeated Cournot game with trigger strategy punishment, we demonstrate that the relationship between market concentration and collusion sustainability depends on the strength of network externalities. The latter is shown to interact with the number of firms and to affect the profitability of cooperation vs. competition, which delivers the result, challenging conventional wisdom, that lower market concentration can make collusion more stable.
    Keywords: Collusion, market concentration, network ekects
    JEL: L13 L14 L41
    Date: 2016–04
  2. By: Bryan S. Graham
    Abstract: In social and economic networks linked agents often share additional links in common. There are two competing explanations for this phenomenon. First, agents may have a structural taste for transitive links -- the returns to linking may be higher if two agents share links in common. Second, agents may assortatively match on unobserved attributes, a process called homophily. I study parameter identifiability in a simple model of dynamic network formation with both effects. Agents form, maintain, and sever links over time in order to maximize utility. The return to linking may be higher if agents share friends in common. A pair-specific utility component allows for arbitrary homophily on time-invariant agent attributes. I derive conditions under which it is possible to detect the presence of a taste for transitivity in the presence of assortative matching on unobservables. I leave the joint distribution of the initial network and the pair-specific utility component, a very high dimensional object, unrestricted. The analysis is of the `fixed effects' type. The identification result is constructive, suggesting an analog estimator, whose single large network properties I characterize.
    JEL: C1 C14 C23 C25 D85
    Date: 2016–04
  3. By: Haselmann, Rainer; Schoenherr, David; Vig, Vikrant
    Abstract: We employ a unique dataset on members of an elite service club in Germany to investigate how elite networks affect the allocation of resources. Specifically, we investigate credit allocation decisions of banks to firms inside the network. Using a quasi-experimental research design, we document misallocation of bank credit inside the network, with state-owned banks engaging most actively in crony lending. The aggregate cost of credit misallocation amounts to 0.13 percent of annual GDP. Our findings, thus, resonate with existing theories of elite networks as rent extractive coalitions that stie economic prosperity.
    JEL: F34 F37 G21 G28 G33 K39
    Date: 2016
  4. By: Bertin Martens (European Commission – JRC - IPTS)
    Abstract: This report provides an overview of the relevant economic research literature on platforms or multi-sided online markets. It discusses platforms from a regulatory policy angle, including potential market failures in platforms, the extent of self-regulation and possible regulatory responses through existing competition policy, consumer protection and data protection instruments. It covers selected policy issues associated with these platforms including possible sources of bias in search engines and search rankings, data protection and the use of personal data in platforms, and platform liabilities within and beyond the e-commerce directive.
    Keywords: multi-sided markets, digital online platforms, market failure, regulation, e-commerce directive, search engines, data protection, intermediary liabilities
    JEL: F15
    Date: 2016–05
  5. By: Prema-chandra Athukorala; Tala Talgaswatta; Omer Majeed
    Abstract: Global production sharing — cross-border dispersion of production processes within vertically integrated global industries — has been an increasingly important structural feature of economic globalization in the recent decades. This paper examines patterns and determinants of global production sharing with an emphasis on how Australian manufacturing fits into global production networks (GPNs). Though Australia is a minor player in GPNs, there is evidence that Australian manufacturing has a distinct competitive edge in specialized, skill-intensive tasks in several industries such as aircrafts, medical devices, machine tools, measuring and scientific equipment, and photographic equipment. Specialization in high-value-to-weight components and final goods within GPNs, which are suitable for air transport, helps Australian manufacturing to overcome the ‘tyranny of distance’ in world trade. Being predominantly ‘relationship-specific’, Australian GPN exports are not significantly susceptible to real exchange rate appreciation.
    Keywords: Australian manufacturing, global production sharing, global production networks, gravity model
    JEL: F11 F14 F23 M16
    Date: 2016

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