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on Network Economics |
| By: | Ding, Ke; Pan, Jiutang |
| Abstract: | This paper seeks to argue the significance of platforms on emerging markets through a case study of the Shanzhai cell phone industry in Shenzhen, China. In this industry, value chains are being driven by both the technology platforms and the market platforms. The former include MTK baseband chipset, and so-called Shared PCBA and Shared Mould. The latter include the North Huaqiang Market and the Purchasing and Money Platform. Technology platforms greatly reduced the technological barriers to entry for independent design houses and system integrators, while market platforms markedly improved their poor marketing and purchasing abilities. Due to factors such as social networks, supporting industries, informality and platform governance, strong network effects have been exhibited in the two types of platforms, which have not only fostered numerous start-ups, but have also led to effective exploitation of emerging markets. |
| Keywords: | China, Electronic industries, Telephone, Network, Platform, Network effect, Shanzhai Cell Phone, Emerging markets |
| JEL: | L63 O14 O17 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper302&r=net |
| By: | Nicholas Economides (Stern School of Business, New York University); David Henriques (Nova School of Business and Economics) |
| Abstract: | In Electronic Payment Networks (EPNs) the No-Surcharge Rule (NSR) requires that merchants charge the same final good price regardless of the means of payment chosen by the customer. In this paper, we analyze a three-party model (consumers, merchants, and proprietary EPNs) to assess the impact of a NSR on the electronic payments system, in particular, on competition among EPNs, network pricing to merchants and consumers, EPNs’ profits, and social welfare. We show that imposing a NSR has a number of effects. First, it softens competition among EPNs and rebalances the fee structure in favor of cardholders and to the detriment of merchants. Second, we show that the NSR is a profitable strategy for EPNs if and only if the network effect from merchants to cardholders is sufficiently weak. Third, the NSR is socially (un)desirable if the network externalities from merchants to cardholders are sufficiently weak (strong) and the merchants’ market power in the goods market is sufficiently high (low). Our policy advice is that regulators should decide on whether the NSR is appropriate on a market-by-market basis instead of imposing a uniform regulation for all markets. |
| Keywords: | Electronic Payment System, Market Power, Network Externalities, No-Surcharge Rule, Regulation, Two-sided Markets, MasterCard, Visa, American Express, Discover. |
| JEL: | L13 L42 L80 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1103&r=net |
| By: | Keser, Claudia; Suleymanova, Irina; Wey, Christian |
| Abstract: | We examine a technology adoption game with network effects in which coordination on technology A and technology B constitute a Nash equilibrium. Coordination on technology B is assumed to be payoff-dominant. We define a technology's critical mass as the minimum share of users necessary to make the choice of this technology a best response for any remaining user. We show that the technology with a lower critical mass is risk-dominant and is chosen by the maximin criterion. We present experimental evidence that both pay-off dominance and risk dominance explain participants' choices. The relative riskiness of a technology can be proxied using technologies' critical masses or stand-alone values. -- |
| Keywords: | Network Effects,Critical Mass,Coordination,Riskiness |
| JEL: | C72 C91 D81 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:33&r=net |
| By: | Carlos Canon (Toulouse School of Economics) |
| Abstract: | This paper studies a "market creating" firm (platform) that offers a matching environment by charging an access fee to a population of high and low type users who wish to form a match. We focus on an environment where users only observe a signal of their randomly assigned partner's type and where the informativeness of the signal is controlled by the firm. We study how both tools, access fee and signal informativeness, can be used to screen particular segments of the population. We finish by characterizing the set of optimal menus. The paper proposes three results. We show that information provision has a screening role when network effects are heterogeneous because a platform cannot induce every level of participation using only the access fee. Secondly, any platform will optimally offer a menu such that only high types participate, or where every user participates. In the former the signal is perfectly informative; in the latter it is partially informative. Lastly, the profit maximizing firm will over-provide information in relation to the surplus maximizing firm, and the higher the heterogeneity in the population, the higher the chance of the optimal menu excluding low type users. |
| Keywords: | Pricing; Market Design; Matching; Information Provision; Heterogeneous Network Effects |
| JEL: | L11 L15 D42 D83 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1120&r=net |
| By: | Grahn-Voorneveld, Sofia (VTI) |
| Abstract: | This paper studies the incentives for different countries to cooperate concerning pricing in transport systems, and how to handle the profit from such cooperation. Two types of simple networks with congestion are considered; one with parallel links, and one serial network with a number of consecutive links. The owner of each link tolls the traffic using the link. First the incentives for cooperative behavior among the countries are studied, and shown to be considerable. This is done by using non-cooperative game theory. Second, cooperative game theory is used to analyse solution concepts for allocating the resources raised from cooperation. |
| Keywords: | Transport networks; game theory; cooperative game theory |
| JEL: | C71 C72 H71 L92 R41 |
| Date: | 2011–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2011_007&r=net |
| By: | Nikolaus Hautsch; Julia Schaumburg; Melanie Schienle |
| Abstract: | We propose the systemic risk beta as a measure for financial companies’ contribution to systemic risk given network interdependence between firms’ tail risk exposures. Conditional on statistically pre-identified network spillover effects and market and balance sheet information, we define the systemic risk beta as the time-varying marginal effect of a firm’s Value-at-risk (VaR) on the system’s VaR. Suitable statistical inference reveals a multitude of relevant risk spillover channels and determines companies’ systemic importance in the U.S. financial system. Our approach can be used to monitor companies’ systemic importance allowing for a transparent macroprudential regulation. |
| Keywords: | Systemic risk contribution, systemic risk network, Value at Risk, network topology, two-step quantile regression, time-varying parameters |
| JEL: | G18 G32 G38 C21 C51 C63 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2011-072&r=net |
| By: | Jason M. Fletcher (Yale University); Stephen L. Ross (University of Connecticut) |
| Abstract: | Researchers typically examine peer effects by defining the peer group broadly (all classmates, schoolmates, neighbors) because of the lack of friendship information in many data sources as well as to enable the use of plausibly exogenous variation in peer group composition across cohorts in the same school. This paper estimates the effects of friend's health behaviors on own health behaviors for adolescents. A causal effect of friend's health behaviors is identified by comparing similar individuals who have the same friendship opportunities because they attend the same school and make the same friendship choices, under the assumption that the friendship choice reveals information about an individual's unobservables. We combine this identification strategy with a cross-cohort, within school design so that the model is identified based on across grade differences in the clustering of health behaviors within specific friendship options. This strategy allows us to separate the effect of friends behavior on own behavior from the effect of friends observables attributes on behavior, a key aspect of the reflection problem. We use a partial equilibrium model of friendship formation in order to derive the conditions under which our identification strategy will provide consistent estimates, and the key assumption required for our strategy to be feasible is supported by the empirical patterns of across cohort variation that we observe in our data. Our results suggest that friendship network effects are important in determining adolescent tobacco and alcohol use, but are over-estimated in specifications that do not fully take into account the endogeneity of friendship selection by 15-25%. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2011-011&r=net |
| By: | Kuroiwa, Ikuo; Nabeshima, Kaoru; Tanaka, Kiyoyasu |
| Abstract: | The growing importance of innovation in economic growth has encouraged the development of innovation capabilities in East Asia, within which China, Japan, and Korea are most important in terms of technological capabilities. Using Japanese patent data, we examine how knowledge networks have developed among these countries. We find that Japan's technological specialization saw little change, but those of Korea and China changed rapidly since 1970s. By the year 2009, technology specialization has become similar across three countries in the sense that the common field of prominent technology is "electronic circuits and communication technologies". Patent citations suggest that technology flows were largest in the electronic technology, pointing to the deepening of innovation networks in these countries. |
| Keywords: | East Asia, China, South Korea, Japan, Technological innovations, Industrial technology, Patents, Technology transfer, Electronics, Telecommunication, Innovation network, Patent statistics |
| JEL: | L6 L63 O31 O33 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper285&r=net |
| By: | Tiziano Squartini; Giorgio Fagiolo; Diego Garlaschelli |
| Abstract: | The international trade network (ITN) has received renewed multidisciplinary interest due to recent advances in network theory. However, it is still unclear whether a network approach conveys additional, nontrivial information with respect to traditional international-economics analyses that describe world trade only in terms of local (first-order) properties. In this and in a companion paper, we employ a recently proposed randomization method to assess in detail the role that local properties have in shaping higher-order patterns of the ITN in all its possible representations (binary/weighted, directed/undirected, aggregated/disaggregated by commodity) and across several years. Here we show that, remarkably, the properties of all binary projections of the network can be completely traced back to the degree sequence, which is therefore maximally informative. Our results imply that explaining the observed degree sequence of the ITN, which has not received particular attention in economic theory, should instead become one the main focuses of models of trade. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1103.1243&r=net |
| By: | Tiziano Squartini; Giorgio Fagiolo; Diego Garlaschelli |
| Abstract: | Based on the misleading expectation that weighted network properties always offer a more complete description than purely topological ones, current economic models of the International Trade Network (ITN) generally aim at explaining local weighted properties, not local binary ones. Here we complement our analysis of the binary projections of the ITN by considering its weighted representations. We show that, unlike the binary case, all possible weighted representations of the ITN (directed/undirected, aggregated/disaggregated) cannot be traced back to local country-specific properties, which are therefore of limited informativeness. Our two papers show that traditional macroeconomic approaches systematically fail to capture the key properties of the ITN. In the binary case, they do not focus on the degree sequence and hence cannot characterize or replicate higher-order properties. In the weighted case, they generally focus on the strength sequence, but the knowledge of the latter is not enough in order to understand or reproduce indirect effects. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1103.1249&r=net |
| By: | Gal OEstreicher-Singer (Tel Aviv University); Barak Libai (Interdisciplinary Center) |
| Abstract: | Traditionally, the value of a product has been assessed according to the direct revenues the product creates. However, products do not exist in isolation but rather influence one another's sales. Such influence is especially evident in eCommerce environments, where products are often presented as a collection of webpages linked by recommendation hyperlinks, creating a large-scale product network. Here we present the first attempt to use a systematic approach to estimate products' true value to a firm in such a product network. Our approach, which is in the spirit of the PageRank algorithm, uses easily available data from large-scale electronic commerce sites and separates a product’s value into its own intrinsic value, the value it receives from the network, and the value it contributes to the network. We apply this approach to data collected from Amazon.com and from BarnesAndNoble.com. Focusing on one domain of interest, we find that if products are evaluated according to their direct revenue alone, without taking their network value into account, the true value of the "long tail" of electronic commerce may be underestimated, whereas that of bestsellers might be overestimated. |
| Keywords: | networks, product networks, electronic commerce, ecommerce, recommender systems, long tail |
| JEL: | D4 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1129&r=net |