Trade negotiations in the presence of network externalities

Network externalities exist when the benefit a consumer derives from a good or service depends on the number of other consumers using the same good, or service (as happens, for example, with telecommunications, television broadcasting standards, and many other technology-related goods and services). National monopolies, regulated and endorsed by sovereign governments, tended to produce network externalities in the past: most countries had telephone monopolies, often state-owned, before deregulation. Whether to allow foreign competition in such industries becomes a pressing issue when national boundaries begin to blur as technology advances, and as previously untraded goods and services become tradable. Despite obvious gains from trade in such newly tradable sectors, governments often keep trade-prohibiting measures. With analog high definition television (HDTV) transmission standards, for example, regulations and politics kept Europe, and Japan from cooperating, so each invested heavily to develop its system in an attempt to have its own standard adopted by the rest of the world. The author analyzes how the presence of network externalities affects a country's willingness to trade. In her model, governments decide whether or not to allow international trade. When trading is permitted, the superior standard drives out all other in the trading area. She shows that even when there are efficiency gains from worldwide standardization, global free trade may not prevail. The technology leader is generally eager to trade, but countries with less advanced technology often choose to form inefficient regional blocks, or not to trade at all. Once such regional networks are established, global efficiency-enhancing free trade becomes even harder to achieve than it would have been in their absence. Transfer payments between countries reduce or eliminate such inefficiency, and facilitate the achievement of efficient trade in products. To achieve mutually beneficial arrangements, it is important to arrive at multilateral agreements before regional blocks form.Economic Theory&Research,Environmental Economics&Policies,Trade Policy,Payment Systems&Infrastructure,Labor Policies,Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Trade and Regional Integration

Buying commercial law: Choice of law, choice of forum, and network externalities

Copyright @ 2009 Bryan DruzinThis paper applies network effect theory to transnational commercial law, arguing that commercial parties selecting law through choice of law and choice of forum clauses can be likened to consumers selecting a product, and thus equally susceptible to the effects of network externalities. The number of “consumers” who subscribe to the same legal norms is analogous to the number of consumers who use a product. As the number of “consumers” increases, so too does the inherent value of selecting that jurisdiction, inducing even more parties to “purchase” that body of law. This is a network effect. I argue that transnational commercial law is ideally calibrated so as to generate a network effect. This stems from the inherent nature of commerce. The discussion distinguishes between two kinds of externalities, direct and indirect network externalities, concluding that network systems that possess both kinds of network externalities (as is the case with law-selection decisions in commercial contracts), are the best candidates to produce a robust network effect. I then examine how the twin ingredients of fluid interaction and frequent choice present in commerce precipitate a network effect; expansive interaction places a higher premium on the need for synchronization, and frequent opportunities to select law in the contracts of fresh commercial relationships allow for an incremental drift towards a specific jurisdiction. The paper ultimately concludes that, as a result, network externalities indeed play an influential role in the ascension of particular jurisdictions over others in law-selection decisions, an important conclusion as it points to an unrecognized influence underpinning the current development of transnational commercial law

Data standardization

With data rapidly becoming the lifeblood of the global economy, the ability to improve its use significantly affects both social and private welfare. Data standardization is key to facilitating and improving the use of data when data portability and interoperability are needed. Absent data standardization, a “Tower of Babel” of different databases may be created, limiting synergetic knowledge production. Based on interviews with data scientists, this Article identifies three main technological obstacles to data portability and interoperability: metadata uncertainties, data transfer obstacles, and missing data. It then explains how data standardization can remove at least some of these obstacles and lead to smoother data flows and better machine learning. The Article then identifies and analyzes additional effects of data standardization. As shown, data standardization has the potential to support a competitive and distributed data collection ecosystem and lead to easier policing in cases where rights are infringed or unjustified harms are created by data-fed algorithms. At the same time, increasing the scale and scope of data analysis can create negative externalities in the form of better profiling, increased harms to privacy, and cybersecurity harms. Standardization also has implications for investment and innovation, especially if lock-in to an inefficient standard occurs. The Article then explores whether market-led standardization initiatives can be relied upon to increase welfare, and the role governmental-facilitated data standardization should play, if at all

General Network Effects and Welfare

Abstract. (In)direct network effects arise frequently in economic models but, for rea-sons of analytical tractability, are often assumed to be linear. Here, we examine the general non-linear case with two platforms. We establish the conditions characterising equilibria and show that welfare changes can be related in a simple, intuitive way to the degree of diminishing returns of the network effects function

Simulation of undular bores evolution with damping

Propagation of undular bores with damping is considered in the framework of perturbed extended Korteweg-de Vries (peKdV) equation. Two types of damping terms for the peKdV equation, namely linear and Chezy frictional terms, which describe the turbulent boundary layers in the fluid flow are considered. Solving the peKdV equation numerically using the method of lines shows that under the influence of damping, the lead-ing solitary wave of the undular bores will split from the nonlinear wavetrain, propagates and behaves like an isolated solitary wave. The amplitude of the leading wave will remain the same for some times before it starts to decay again at a larger time. In general the amplitude of the leading wave and the mean level across the undular bore decreases due to the effect of damping

The Control of Porting in Two-Sided Markets

A sizable literature has grown up in recent years focusing on two-sided markets in which economies of scale combined with complementarities between a platform and its associated ‘software’ or ‘services’ can generate indirect network effects (that is positive feedback between the number of consumers using that platform and the utility of an individual consumer). In this paper we introduce a model of ‘porting’ in such markets where porting denotes the conversion of ‘software’ or ‘services’ developed for one platform to run on another. Focusing on the case where a dominant platform exists we investigate the impact on equilibrium and the consequences for welfare of the ability to control porting. Specifically, we show that the welfare costs associated with the ‘control of porting’ may be more significant than those arising from pricing alone. This model and its associated results are of particular relevance because of the light they shed on debates about the motivations and effects of actions by a dominant platform owner. Recent examples of such debates include those about Microsoft’s behaviour both in relation to its operating system and its media player, Apple’s behaviour in relation to its DRM and iTunes platform, and Ebay’s use of the cyber-trespass doctrine to prevent access to its site

(De)convergence in TV: a comparative analysis of the development of Smart TV

Against the backdrop of media convergence, Smart TVs are developing rapidly in large parts of the world. Smart TV refers to the integration of broadband Internet and social media features into TV sets. From a media business perspective, the proliferation of Smart TV services may put pressure on the market structure of the TV landscape, and urge for new business models in order to capture the dynamics of media convergence. By means of a comparative analysis in four European markets (Belgium, Germany, the Netherlands and the United Kingdom), the development of Smart TV is sketched in terms of viewing patterns, business models and standardization. The conclusion is that national TV markets are evolving quite differently, so that service providers must adapt their marketing strategies to reflect local market conditions. Hence, the success of Smart TV ultimately depends on the local package of value-added services and the amount of strategic partnerships with content owners, TV broadcasters and pay-TV operators