scholarly journals Network Externality: An Uncommon Tragedy

1994 ◽  
Vol 8 (2) ◽  
pp. 133-150 ◽  
Author(s):  
S. J Liebowitz ◽  
Stephen E Margolis
Keyword(s):  
Market Failure ◽  
Network Effects ◽  
Network Externalities ◽  
Network Externality ◽  
Market Failures ◽  
Transition Problem

Economists have defined ‘network externality’ and have examined putative inframarginal market failures associated with it. This paper distinguishes between network effects and network externalities, where the latter are market failures. The authors argue that while network effects are important, network externalities are theoretically fragile and empirically undocumented. Some network externalities are merely pecuniary. Network ownership or transactions among network participants can internalize some network effects. The type of market failure that has been associated with these externalities is a transition problem that has little to do with externality.

scholarly journals Which Product Will Survive To Be Standard?: Technology Adoption And The Role Of Governments

2011 ◽  
Vol 4 (2) ◽  
Author(s):  
Akinori Tomohara
Keyword(s):  
Evolutionary Game Theory ◽  
Technology Diffusion ◽  
Market Failure ◽  
Network Externalities ◽  
Evolutionary Game ◽  
Jel Classification ◽  
Market Failures ◽  
Font Size ◽  
Recent Developments

<p class="MsoBodyText2" style="text-align: justify; line-height: normal; margin: 0in 0.6in 0pt 0.5in; tab-stops: .5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">While several surveys on technology diffusion have been undertaken, few attempts have been made to synthesize existing research to provide a framework for examining the role of governments.<span style="mso-spacerun: yes;">&nbsp; </span>Is government intervention really required to remedy market failures caused by network externalities?<span style="mso-spacerun: yes;">&nbsp; </span>This paper covers recent developments in this area, focusing on works in stochastic evolutionary game theory.<span style="mso-spacerun: yes;">&nbsp; </span>We relate the results of equilibrium selections to the role of governments. JEL classification: L1, L53 Keywords: Path Inefficiency; Market Failure; Network Externalities</span></span></p>

Discontinuous Institutional Alternatives in the Context of Economy Deregulation

2004 ◽  
pp. 94-110 ◽  
Author(s):  
A. Shastitko
Keyword(s):  
Market Failure ◽  
Transaction Management ◽  
Market Failures ◽  
Relative Cost ◽  
State Participation

Various ways of state participation in the mechanisms of transaction management are considered in the article. Differences between compensation and elimination of the market failures are identified. Opportunities and risks of non-regulatory alternatives usage as a mean of market failure compensation are described. Based on classification of goods correlated to relative cost of their useful characteristics evaluation (search, experience, merit) questions of institutional alternatives in three areas (political, financial and commodity) are examined.

Working Time under Alternative Pay Contracts in the Ride-Sharing Industry

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Filippo Belloc
Keyword(s):  
Network Effects ◽  
Network Externalities ◽  
Profit Sharing ◽  
Static Model ◽  
Peer To Peer ◽  
Working Time ◽  
Intensive Margin ◽  
Hours Worked ◽  
Ride Sharing ◽  
Transportation Sector

AbstractWe study hours worked by drivers in the peer-to-peer transportation sector with cross-side network effects. Medallion lease (regulated market), commission-based (Uber-like pay) and profit-sharing (“pure” taxi coop) compensation schemes are compared. Our static model shows that network externalities matter, depending on the number of active drivers. When the number of drivers is limited, in the presence of positive network effects, a regulated system always induces more hours worked, while the commission fee influences the comparative incentives towards working time of Uber-like pay versus profit-sharing. When the number of drivers is infinite (or close to it), the influence of network externalities on optimal working time vanishes. Our model helps identifying which is the pay scheme that best remunerates longer working times and offers insights to regulators seeking to improve the intensive margin of coverage by taxi services.

scholarly journals Examining Protection Motivation and Network Externality Perspective Regarding the Continued Intention to Use M-Health Apps

2021 ◽  
Vol 18 (11) ◽  
pp. 5684
Author(s):  
Yumei Luo ◽  
Guiping Wang ◽  
Yuwei Li ◽  
Qiongwei Ye
Keyword(s):  
Self Efficacy ◽  
Network Externalities ◽  
Network Externality ◽  
Intention To Use ◽  
Protection Motivation ◽  
Direct Impact ◽  
Perceived Vulnerability ◽  
Response Efficacy ◽  
Health Apps ◽  
Direct Network

M-health apps have developed rapidly and are widely accepted, but users’ continued intention to use m-health apps has not been fully explored. This study was designed to obtain a better understanding of users’ continued intention to use m-health apps. We developed a theoretical model by incorporating the protection motivation theory and network externalities and conducted an empirical study of a 368-respondent sample. The results showed that: (1) perceived vulnerability has a direct impact on users’ self-efficacy and response efficacy; (2) self-efficacy and response efficacy have a direct impact on users’ attitudes and continued intention; (3) network externalities affect users’ attitudes and continued intention, among which direct network externalities have an indirect impact on users’ continued intention through attitude; and (4) the impacts of self-efficacy, response efficacy, and indirect network externalities on continued intention are partially meditated by attitudes.

scholarly journals Problems of Overcoming Market Failures in the Context of Economic Crisis in the Euro Area

2014 ◽  
pp. 162-167
Author(s):  
A. Y. Pluiko
Keyword(s):  
Economic Development ◽  
Economic Crisis ◽  
Euro Area ◽  
Market Failure ◽  
World Market ◽  
Economic Governance ◽  
Market Failures ◽  
Single Currency ◽  
Poor Countries ◽  
Money Circulation

The article analyses the manifestations of a market failure problem revealed during the economic crisis in the euro area, namely business cycles, market inability to ensure money circulation and avoid inflation. It is shown that the cyclicity of economic development has revealed in various degrees of economic contraction and different rates of its recovery. These differences have been exacerbated by the new procyclical factors emerged from the transition to a single currency. As for money circulation the crisis has almost no impact on the single currency functioning: the euro has maintained its position on the world market and properly performed money functions in the domestic. The goal to achieve economic development without inflation in the euro area generally has been solved successfully by the European Central Bank (ECB). However, due to the fact that the ECB in its monetary policy does not pay sufficient attention to the increased inflation in small and relatively poor countries, the crisis has been more acute in them than in large countries with low inflation. The goals of ensuring money circulation and avoiding inflation can be settled more effectively in the euro area in case of more tight coherence in economic policy and strengthening of supranational mechanisms of economic governance.

A Discussion Paper on Cybersecurity Policies

2017 ◽  
pp. 155-165
Author(s):  
Ayse Kok
Keyword(s):  
Government Regulation ◽  
Market Failure ◽  
Government Intervention ◽  
Main Argument ◽  
Market Failures ◽  
Discussion Paper

This chapter presents various reasons for the insufficiency of externalities in terms of the inference of market failure with regard to the field cybersecurity policy, which is claimed to be necessary for government intervention. The main argument of this chapter is that cybersecurity market failures are much smaller than initially assumed, and as a result, more harm might be done by trying to correct them through naïve government regulation.

Why So Much Consensus?

2021 ◽  
pp. 95-115
Author(s):  
Hervé Crès ◽  
Mich Tvede
Keyword(s):  
Decision Making ◽  
Market Failure ◽  
Holistic Approach ◽  
Individual Characteristics ◽  
Collective Decision ◽  
Collective Decision Making ◽  
Pareto Principle ◽  
Market Failures ◽  
Full Agreement ◽  
Clear Cut

An even more holistic approach to the problem is adopted by looking at how collective decision-making impacts the choices and characteristics of individual agents, e.g. their shareholdings, their beliefs about economic prospects, or even their preferences. The thesis is that individual characteristics shape collective choices and are at the same time shaped by them, forming a duality between persons and groups. The analysis is deployed on the network of affiliation of investors to firms. Indeed, suppose the Pareto principle holds at both the collective and individual levels, then a full agreement between all agents occurs within a cluster of investors and firms, despite potentially severe market failures—the ‘single thought’ theorem. Efficiency results from the endogeneity of individual characteristics, yet the theorem is strikingly strong and clear-cut. An analysis of what it takes for the Pareto principle to hold is proposed in each of the three contexts of market failure.

Designing Ecolabels In Order To Mitigate Market Failures

2005 ◽  
Vol 16 (4) ◽  
pp. 411-430 ◽  
Author(s):  
Douadia Bougherara ◽  
Gilles Grolleau
Keyword(s):  
Asymmetric Information ◽  
Qualitative Study ◽  
Public Goods ◽  
Market Failure ◽  
Jel Classification ◽  
Market Failures ◽  
Cognitive Support

For the market for ecofriendly characteristics of agrofood products to function effectively, means of mitigating asymmetric information, informational overload and public goods properties are necessary. Ecolabel success requires a design and an implementation capable of mitigating simultaneously these three sources of market failures. Our contribution differs from many to date by (1) introducing and analyzing the informational overload as a source of market failure and (2) considering the ecolabel, not only as a tool to re-establish information symmetry between the producer and consumer but also as a way to overcome informational overload and public goods problems. We analyze how these sources of market failures may be mitigated by providing information perceived as trustworthy, tying credence and public attributes to verifiable and private attributes and designing the ecolabel as a cognitive support for consumers. We provide an exploratory qualitative study of several French ecolabels to stress how they more or less succeed in attenuating the identified sources of market failures. Several implications for policymakers and managers are stressed. We conclude by suggesting several issues requiring further investigations. JEL Classification Numbers: D11, D21, L15

scholarly journals Government Failures in Development

1990 ◽  
Vol 4 (3) ◽  
pp. 9-23 ◽  
Author(s):  
Anne O Krueger
Keyword(s):  
Developing Countries ◽  
Market Failure ◽  
The Political ◽  
Economic Policies ◽  
Market Failures ◽  
Political Arena ◽  
Positive Theory ◽  
Government Behavior ◽  
Government Failure ◽  
The Government

By the 1970s and early 1980s, governments in most developing countries were mired down in economic policies that were manifestly unworkable. Whether market failures had been present or not, most knowledgeable observers concluded that there had been colossal government failures. In many countries, there could be little question but that government failure significantly outweighed market failure. This essay focuses on insights relating directly to government behavior affecting economic activity and economic growth in developing countries. It briefly examines each of the following questions: 1) What is “the government”? 2) What is the comparative advantage of government? 3) What are the dynamics of government intervention? 4) Can a positive theory of political behavior be formulated that will help explain when and how alternative policies will evolve in the political arena?

scholarly journals Una crítica a la teoría de los fallos del mercado desde la perspectiva de la Escuela Austriaca

2021 ◽  
pp. 133-159
Author(s):  
Ángel Martín Oro
Keyword(s):  
Public Goods ◽  
Imperfect Competition ◽  
Market Failure ◽  
Welfare Economics ◽  
Perfect Competition ◽  
Market Failures ◽  
Failure Theory ◽  
Palabras Clave ◽  
Competitive Model ◽  
Main Criticism

In this paper, we present a critical analysis of the standard market failure theory, one of the most important pillars of economic interventionism. This theory justifies state interference when markets do not produce so-called optimal outcomes; being based on two fundamental concepts of neoclassical welfare economics, namely, Pareto efficiency and perfect competition. The main criticism is directed at the theoretical framework in which is based on, through the contributions of the Austrian School of Economics. To accomplish that, after revising the basics of the market failure theory, we will put forward an alternative concept of efficiency, as well as questioning the suitability of the perfect competitive model. Next, we will reconsider theoretically the traditional market failures, that is, monopolies, public goods and externalities’ problems. This analysis is accompanied by historical cases that illustrate our criticism. Key words: Market failure, welfare economics, efficiency, imperfect competition, public goods, externalities. JEL codes: B53, D60, H00. Resumen: En este trabajo se realiza un análisis crítico de la teoría tradicional de los fallos del mercado, uno de los pilares más importantes del intervencionismo económico. Esta teoría vendría a justificar la interferencia estatal en los casos en que el mercado no produce resultados óptimos; estando apoyada en dos conceptos fundamentales en la economía del bienestar neoclásica: la eficiencia paretiana y el modelo de competencia perfecta. La principal crítica se realizará al marco teórico en el que se inserta, a partir de las aportaciones de la Escuela Austriaca de Economía. Para ello, tras describir a grandes rasgos la teoría de los fallos del mercado, expondremos un concepto alternativo de eficiencia, y nos cuestionaremos la validez teórica del modelo perfectamente competitivo. A continuación, reconsideraremos desde un punto de vista teórico los fallos del mercado tradicionales, esto es: monopolios, bienes públicos y externalidades. Este análisis se acompañará de casos históricos que ilustren y apoyen nuestra crítica. Palabras clave: Fallos del mercado, economía del bienestar, eficiencia, competencia imperfecta, bienes públicos, externalidades. Códigos JEL: B53, D60, H00.

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