nep-net New Economics Papers
on Network Economics
Issue of 2016‒10‒16
twelve papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Monetization Strategies for Internet Companies By Voigt, Sebastian
  2. An allocation rule for dynamic random network formation By Jean-François Caulier; Michel Grabisch; Agnieszka Rusinowska
  3. HOW NETWORKS MODERATE RETURN ON SALES IN A LOGISTICS ENTERPRISE - CASE STUDY OF UPS By Sylwia Šęgowik-Świącik; Michał Dziadkiewicz; Anna Wiśniewska-Sałek; Dagmara Bubel
  4. Production Networks By Kenan Huremovic; Fernando Vega-Redondo
  5. Multiplex interbank networks and systemic importance: An application to European data By Aldasoro, Iñaki; Alves, Iván
  6. The modelling of networks using Exponential Random Graph Models: an introduction By Johannes VAN DER POL
  7. Do banks differently set their liquidity ratios based on their network characteristics? By Isabelle Distinguin; Aref Mahdavi-Ardekani; Amine Tarazi
  8. Influence networks and public goods By Dunia Lopez-Pintado
  10. Endogenous Market Formation and Monetary Trade: an Experiment By Avi Weiss; Gabriele Camera; Dror Goldberg
  11. Participation in Massive Open Online Courses: The Effect of Learner Motivation and Engagement on Achievement By Semenova Tatiana
  12. Does Social Interaction Improve Learning Outcomes? Field Evidence from Massive Open Online Education By Dennis Zhang; Gad Allon; Jan Van Mieghem

  1. By: Voigt, Sebastian
    Abstract: Many Internet service companies such as providers of two-sided markets, social networks, or online games rely on the social interaction between their user base and thus capitalize from positive network effects. For such companies, a common strategy is to offer (basic) services for free (and thereby abolish entry barrier of a one-off or recurring price) and to charge their users for premium services. Companies such as eBay, PayPal, LinkedIn, or Skype added paid services to their originally free business models, either via subscriptions, PAYG, or direct sales of virtual items. Their strategy how to make money and whom to bill however differs widely. In the Internet business, ‘monetization’ has become a frequently used buzzword for all aspects of a company’s revenue strategy which includes the decision who should be billed (e.g., for a two-sided market: seller vs. buyer vs. advertisers only), with which price model (e.g., mandatory subscription vs. optional subscriptions vs. selling virtual currency or items) and price level (e.g., differentiated between user groups), and – in case of a freemium strategy – how a new (free) user can be converted most efficiently into a paying and remunerative customer (e.g., via effective CRM measures). The overarching objective of all monetization measures is to maximize the company’s revenue and/or profit. The field of monetization offers a wide field of research opportunities. Four of these are covered in this dissertation: The Name-your-own-price model, users’ spending behavior in virtual communities, the monetization of network effects in social networks, and the legal boundaries of social network usage. As a result, this dissertation solves a series of questions currently being worked on by practitioners and uses a wide range of methods from various disciplines such as economic, psychological, and game theory.
    Date: 2016
  2. By: Jean-François Caulier (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: Most allocation rules for network games presented in the literature assume that the network structure is fixed. We put explicit emphasis on the construction of networks and examine the dynamic formation of networks whose evolution across time periods is stochastic. Time-series of networks are studied that describe processes of network formation where links may appear or disappear at any period. Moreover, convergence to an efficient network is not necessarily prescribed. Transitions from one network to another are random and ruled by a stochastic process, typically a Markov chain. We propose the link-based scenario allocation rule for such dynamic random network formation processes and provide its axiomatic characterization. By considering a monotone game and a particular (natural) network formation process we recover the link-based flexible network allocation rule of Jackson (2015).
    Keywords: dynamic networks,network game,link-based allocation rule,Markov chain,characterization
    Date: 2015
  3. By: Sylwia Šęgowik-Świącik (Politechnika Częstochowska); Michał Dziadkiewicz (Politechnika Częstochowska); Anna Wiśniewska-Sałek (Politechnika Częstochowska); Dagmara Bubel (Politechnika Częstochowska)
    Abstract: The paper addresses the problem of the moderation role of networks in the area of return on sales, indicating its impact on effectiveness of the process of management in a logistics enterprise. The whole discussion presented in the paper was divided into two main parts. The first part of the paper presents planes of profitability of an enterprise operating in a network. The next, second part of the paper is a result of empirical studies providing the answer to the research question. The aim of the paper is to identify and assess the relationships between the moderation role of networks and return on sales in a logistics enterprise. In order to answer the research question, the results of empirical studies based on a case study were presented. The conclusions from the studies suggest that an enterprise cooperating in a network moderates return on sales of the different products and services provided by network participants. Through this paper we would like to contribute to discussion on the extent to which network enterprises should moderate return on sales in order to stay on saturated markets. The research methods applied to achieve the aim are literature studies, case study, trend analysis and analysis of return on sales. The issues of the moderation role of networks in the area of return on sales are important and topical due to their impact on effectiveness of management of network enterprises.
    Keywords: management, network enterprises, logistics
    JEL: M21
  4. By: Kenan Huremovic (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS); Fernando Vega-Redondo (Bocconi University & IGIER)
    Abstract: In this paper, we model the economy as a production network of competitive firms that interact in a general-equilibrium setup. First, we find that, at the unique Walrasian equilibrium, the profit of each active firm is proportional to (a suitable generalization of) its Bonacich centrality. We also determine consumer welfare at equilibrium and characterize efficient networks. Then we proceed to conduct a broad range of comparative-static analyses. These include the effect on profits and welfare of: (a) distortions (e.g. tax/subsidies) imposed on the whole economy or specific firms; (b) structural changes such as the addition of links and the elimination of nodes; (c) productivity and preference changes. We discover that the induced effects are in general nonmonotone, depend on global network features, and impinge on each sector depending on the pattern of incentralities displayed by its input providers and output users. Furthermore, the inter-sector “linkages” underlying these effects can usually be decomposed – following the heuristic dichotomy proposed by Hirschman (1958) – into a forward (push) component and a backward (pull) one. Finally, we undertake some preliminary analysis of firm dynamics and illustrate that, when evaluating policies of support and shock mitigation from a dynamic viewpoint, the reliance on strict market-based criteria can be quite misleading in terms of social welfare.
    Keywords: production, networks, distortions, centrality, profit
    JEL: C67 D51 D85
    Date: 2016–10
  5. By: Aldasoro, Iñaki; Alves, Iván
    Abstract: Research on interbank networks and systemic importance is starting to recognise that the web of exposures linking banks balance sheets is more complex than the single-layer-of-exposure approach. We use data on exposures between large European banks broken down by both maturity and instrument type to characterise the main features of the multiplex structure of the network of large European banks. This multiplex network presents positive correlated multiplexity and a high similarity between layers, stemming both from standard similarity analyses as well as a core-periphery analyses of the different layers. We propose measures of systemic importance that fit the case in which banks are connected through an arbitrary number of layers (be it by instrument, maturity or a combination of both). Such measures allow for a decomposition of the global systemic importance index for any bank into the contributions of each of the sub-networks, providing a useful tool for banking regulators and supervisors in identifying tailored policy instruments. We use the dataset of exposures between large European banks to illustrate that both the methodology and the specific level of network aggregation matter in the determination of interconnectedness and thus in the policy making process.
    Keywords: interbank networks,systemic importance,multiplex networks
    JEL: G21 D85 C67
    Date: 2015
  6. By: Johannes VAN DER POL
    Abstract: Networks are representations of relational data. Whether the data used represents social interactions, cooperations or inter-bank dependencies, the structure of the network reflect a decision-making process based on many factors (common friends, technological proximity, geographical proximity). One of the objectives of network analysis is to identify these factors. The analysis of the structure using Exponential Random Graph Models (ERGM) can help in the identification of these factors by answering why two particular agents interact with one another, or why a specific agent has a particular position inside a network. In other words ERGMs allow us to perform an econometric analysis on network data. In the case of networks it is possible that a link depends upon the structure of the network. Usual econometric methods cannot be used because the dependence violates the hypothesis of independence of observations. ERGMs take into account this particularity of network data. \r\nThe aim of this paper is to present the statistical theory behind ERGM models and present an application using R-Project.
    Keywords: Network analysis ; ERGM ; Network structure ; R
    JEL: C59 C13 D85
    Date: 2016
  7. By: Isabelle Distinguin (LAPE - Laboratoire d'Analyse et de Prospective Economique - UNILIM - Université de Limoges - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société); Aref Mahdavi-Ardekani (LAPE - Laboratoire d'Analyse et de Prospective Economique - UNILIM - Université de Limoges - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - UNILIM - Université de Limoges - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société)
    Abstract: This paper investigates the impact of interbank network topology on bank liquidity ratios. Whereas more emphasis has been put on liquidity requirements by regulators since the global financial crisis of2007-2008, how differently shaped interbank networks impact individual bank liquidity behavior remains an open issue. We look at how bank interconnectedness within interbank loan and deposit networks affects their decision to hold more or less liquidity during normal times and distress times and depending on the overall size of the banking sector. Our results show that taking into account the way that banks are linked to each other within a network adds value to traditional liquidity models. Our findings have critical implications with regards to the implementation of Basel III liquidity requirements and bank supervision more generally. JEL Classification: G32, G21, G28 and G01
    Keywords: Interbank network topology,Basel III,Liquidity risk,Financial Crisis
    Date: 2016–06–23
  8. By: Dunia Lopez-Pintado (Universidad Pablo de Olavide and CORE, Universite catholique de Louvain.)
    Abstract: We consider a model of local public goods in a random network context. The influence network determines (exogenously) who observes whom every period and comprises a wide array of options depending on the degree distribution and the in/out-degree correlations. We show that there exists a unique equilibrium level of public good provision and compare it with the efficient level. We derive further insights for this problem by performing a comparative statics analysis.
    Keywords: influence networks, public goods, out-degree, in-degree, best-shot game
    JEL: D85 H41
    Date: 2016–10–04
  9. By: Wioleta Kucharska (Gdansk University of Technology, Gdansk, Poland)
    Abstract: Social network brand sites are increasingly attracting the attention of scientists and managers intrigued by their potential application for brand value creation. The aim of this research is to fill the gap in understanding how users choose among social networking sites as an act of brand identification. Social network users, unlike it is in real life, do not need to own branded products to use their image. For this reason their identification with brands can bring interesting implications for those who study brand value creation. The study presents a new model whose structure of social network brand sites identification drivers varies for customer brand identification in the real and virtual worlds. The presented model reveals that personal branding is a planned effect of brand identification and is crucial for brand value creation in social networks.
    Keywords: CBI, social network, personal branding, brand loyalty
    JEL: M30 M31 Y1
    Date: 2016–10
  10. By: Avi Weiss (Bar-Ilan University); Gabriele Camera; Dror Goldberg
    Abstract: The theory of money typically ignores the fact that the mode of market interaction arises endogenously, and simply assumes a decentralized, bilateral exchange process. However, endogenizing the organization of trade is critical for understanding the conditions that lend themselves to the development of money as a mode of exchange. To study this, we develop a “travelling game” to study the spontaneous emergence of different systems of exchange theoretically and experimentally. Players located on separate “islands” can either stay and trade on their island, or pay a cost to trade elsewhere. Earnings rise with the frequency of trade but fall with the frequency of travel. Decentralized and centralized markets can both emerge in equilibrium. The latter maximize consumption frequencies and are socially efficient; the former minimize travel cost and require the use of a medium of exchange. In the laboratory, a centralized market more frequently emerges when subjects perform diversified economic tasks, and when they interact in large groups and cannot be sure whether they will meet the same counterpart in later periods. The experiment shows that to understand the emergence of monetary systems it is important to amend the theory of money such that the market structure is endogenized.
    Keywords: endogenous institutions, macroeconomic experiments, matching, coordination, markets, money.
    JEL: E4 E5 C9 C92
    Date: 2016–08
  11. By: Semenova Tatiana (National Research University Higher School of Economics)
    Abstract: Massive open online courses (MOOCs) are a relatively new format of distance education which has become popular among students, faculties, employees and others. Regardless of the fact that MOOCs are a widespread phenomenon, they face some challenges including high dropout rates, low levels of student-teacher interaction, low representation of poor and less educated learners, issues with data processing and data analysis for creating predictive models. In our study, we look more closely at the last issue, while creating a model describing the relationship between the motivation, engagement, and achievement of MOOC participants. We use a database which consists of trace data and survey data from students of 20 online courses launched on the Coursera platform in 2014–2015 at the Higher School of Economics. Our research shows that for modelling the relationship between factors and achievement of MOOC students, it is necessary to transform the interval dependent variable into an ordinal one. To evaluate the relationship between motivation, engagement, and achievement, we used mediation analysis with ordinal logistic regression. The research shows that academic motivation of MOOC learners has an indirect effect on their achievement. The level of engagement acts as a mediator of this relationship. At the same time, intrinsic motivation plays an alternative role in the MOOC format compared to a traditional course format. Intrinsic motivation decreases the likelihood of getting a higher score from the second week of the course.
    Keywords: MOOC, Coursera, motivation, intrinsic motivation, engagement, achievement
    JEL: I21 I29
    Date: 2016
  12. By: Dennis Zhang; Gad Allon; Jan Van Mieghem
    Abstract: This paper studies how service providers can design social interaction among participants and quantify the causal impact of that interaction on service quality. We focus on education and analyze whether encouraging social interaction among students improves learning outcomes in Massive Open Online Courses (MOOCs), which are a new service delivery channel with universal access at reduced, if not zero, cost. We analyze three randomized experiments in a MOOC with more than 30; 317 students from 183 countries. Two experiments study large-group interaction by encouraging a random subset of students to visit the course discussion board. The majority of students treated in these experiments had higher social engagement, higher quiz completion rates, and higher course grades. Using these treatments as instrumental variables, we estimate that one additional board visit causally increases the probability that a student finishes the quiz in the subsequent week by up to 4:3%. The third experiment studies small-group interaction by encouraging a random subset of students to conduct one-on-one synchronous discussions. Students who followed through and actually conducted pairwise discussions increased their quiz completion rates and quiz scores by 10% in the subsequent week. Combining results from these three experiments, we provide recommendations for designing social interaction mechanisms to improve service quality.
    Date: 2016

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