A Survey of Models of Network Formation: Stability and Efficiency

I survey the recent literature on the formation of networks. I provide definitions of network games, a number of examples of models from the literature, and discuss some of what is known about the (in)compatibility of overall societal welfare with individual incentives to form and sever links

Allocative and Informational Externalities in Auctions and Related Mechanisms

We study the effects of allocative and informational externalities in (multi-object) auctions and related mechanisms. Such externalities naturally arise in models that embed auctions in larger economic contexts. In particular, they appear when there is downstream interaction among bidders after the auction has closed. The endogeneity of valuations is the main driving force behind many new, specific phenomena with allocative externalities: even in complete information settings, traditional auction formats need not be efficient, and they may give rise to multiple equilibria and strategic non-participation. But, in the absence of informational externalities, welfare maximization can be achieved by Vickrey-Clarke- Groves mechanisms. Welfare-maximizing Bayes-Nash implementation is, however, impossible in multi-object settings with informational externalities, unless the allocation problem is separable across objects (e.g. there are no allocative externalities nor complementarities) or signals are one-dimensional. Moreover, implementation of any choice function via ex-post equilibrium is generically impossible with informational externalities and multidimensional types. A theory of information constraints with multidimensional signals is rather complex, but indispensable for our study

Network industries in the new economy

In this paper we discuss two propositions: the supply and demand of knowledge, and network externalities. We outline the characteristics that distinguish knowledge- intensive industries from the general run of manufacturing and service businesses. Knowledge intensity and knowledge specialisation has developed as markets and globalisation have grown, leading to progressive incentives to outsource and for industries to deconstruct. The outcome has been more intensive competition. The paper looks at what is potentially the most powerful economic mechanism: positive feedback, alternatively known as demand-side increasing returns, network effects, or network externalities. We present alternative demand curves that incorporate positive feedback and discuss their potential economic and strategic consequences. We argue that knowledge supply and demand, and the dynamics of network externalities create new situations for our traditional industrial economy such that new types of economies of scale are emerging and "winner takes all" strategies are having more influence. This is the first of a pair of papers. A second paper will take the argument further and look at the nature of firms' strategies in the new world, arguing that technology standards, technical platforms, consumer networks, and supply chain strategies are making a significant contribution to relevant strategies within the new economy

Applications of Negotiation Theory to Water Issues

The purpose of the paper is to review the applications of non-cooperative bargaining theory to water related issues – which fall in the category of formal models of negotiation. The ultimate aim is that to, on the one hand, identify the conditions under which agreements are likely to emerge, and their characteristics; and, on the other hand, to support policy makers in devising the “rules of the game” that could help obtain a desired result. Despite the fact that allocation of natural resources, especially of trans-boundary nature, has all the characteristics of a negotiation problem, there are not many applications of formal negotiation theory to the issue. Therefore, this paper first discusses the non-cooperative bargaining models applied to water allocation problems found in the literature. Particular attention will be given to those directly modelling the process of negotiation, although some attempts at finding strategies to maintain the efficient allocation solution will also be illustrated. In addition, this paper will focus on Negotiation Support Systems (NSS), developed to support the process of negotiation. This field of research is still relatively new, however, and NSS have not yet found much use in real life negotiation. The paper will conclude by highlighting the key remaining gaps in the literature.Negotiation theory, Water, Agreeements, Stochasticity, Stakeholders

Food on Wheels: Mobile Vending Goes Mainstream

Mobile food vending generates approximately $650 million in revenue annually. The industry is projected to account for approximately$2.7 billion in food revenue over the next five years, but unfortunately, most cities are legally ill-equipped to harness this expansion. Many city ordinances were written decades ago, with a different type of mobile food supplier in mind, like ice cream trucks, hot dog carts, sidewalk peddlers, and similar operators. Modern mobile vending is a substantial departure from the vending typically assumed in outdated local regulations. Vendors utilize large vehicles packed with high-tech cooking equipment and sanitation devices to provide sophisticated, safe food usually prepared to order. Increasingly, city leaders are recognizing that food trucks are here to stay. They also recognize that there is no "one size fits all" prescription for how to most effectively incorporate food trucks into the fabric of a community. With the intent of helping city leaders with this task, this guide examines the following questions: What policy options do local governments have to regulate food trucks? What is the best way to incorporate food trucks into the fabric of a city, taking into account the preferences of all stakeholders?Thirteen cities of varying size and geographic location were analyzed for this study. Information on vending regulations within each of these cities was collected and analyzed, and supplemented with semi-structured interviews with city staff and food truck vendors

The Ambivalent Role of Mimetic Behaviors in Proximity Dynamics: Evidences on the French “Silicon Sentier”

This articles examines the peculiar role of mimetic behaviors in co-location processes. We start showing that geographical proximity between agents and/or firms is not a sufficient nor necessary condition for the collective performance of clusters. Other types of socio-economic proximities characterize clusters, and our purpose is to show that, among the several ways to analyze the complex links between proximities and clusters, the theoretical outlook on the role played by mimetic interactions in co-location processes are certainly one of the most promising. Mimetic behaviors of location (in economics and sociology) are introduced in order to demonstrate that co-location processes can be the result of sequentiality, uncertainty, legitimacy and non market interactions, rather than full rational and isolated decisions and pure strategic market interactions. According to the type of mimetic behavior at work in the clustering process, the nature of socio-economic proximity can differ and have a strong influence of the “evolutionary stability” of clusters. All these theoretical considerations are illustrated through the emblematic French case of “Silicon Sentier”, cluster which has gathered together three hundred firms of the French net-economy (the famous “dotcom”) during the Internet bubble swelling.cluster, mimetic interactions, proximity, stability, Silicon Sentier

Devolution and the New Zealand Resource Management Act

Many past and potential New Zealand reforms involve significant devolution, i.e. the transfer of authority to make decisions on behalf of society from a higher to a lower level of government. In particular the Resource Management Act (RMA), the health and education reforms, and decisions about the institutions for addressing Maori issues have led to significant devolution of authority. Employment policy and social welfare are areas where devolution is an important policy option. The role and function of local government also is inherently an issue of the appropriate level of devolution. Many of these reforms have now been in place for a number of years, so it is appropriate to review our experience of devolution, identify the successes, and attempt to address the problems that have arisen. Two papers address issues of when and how we should devolve authority from central to local government. This paper looks at devolution both from a general theoretical standpoint and from the perspective of the New Zealand Resource Management Act 1991 (RMA), with residential land use as an illustration. Although the RMA is discussed throughout both papers, the framework developed applies to any area of policy for which devolution decisions are being considered. The second paper, Treasury Working Paper 98/7a, applies the framework to the optimal pattern of devolution for policies relating to kiwi protection.

Mainstreaming New Renewable Energy Technologies

This paper outlines the benefits, obstacles and options for governments to support international markets for technology development. International markets for new energy technologies offer greater scope, thereby increasing the incentives and opportunities for technology improvements. As the market is supported by more independent governments, the confidence of technology developers and producers that future markets for their products will exist is increasing, thus enabling capital access and inducing R&D investment and exploration of improved production processes. The bigger markets also allow for international competition, thus allowing for the application of the best available technology. The government challenge to induce sufficient RD&D remains and with international markets the benefits and costs of national governments free-riding on international effort needs to be addressed. Finally, we discuss how international co-operation can be used to evolve the energy system in such a way that it can integrate new technologies at minimum cost