Economics of Networks

The rapid worldwide growth of the Internet and the dramatic changes accompanying the de- and re-regulation of network industries have stimulated debate on applied and practical political topics, as well as a more fundamental theoretical debate within the economic profession.

Abstract

This question was raised by some participants when the topic was suggested as a special module for this project. Many economists working in academia, government institutions, and business have reservations about whether this field of economic research really warrants special attention. On the other hand, the number of scientific articles and conferences using network economics as a label to address issues related to actual organizational phenomena and physical networks increased significantly during the 1990s. Since 1997, the German Research Council (DFG) has even been financing an interdisciplinary Special Research Section (SFB) on Networking as a Factor in Competition 3 at the University of Frankfurt/Main. Furthermore, the rapid worldwide growth of the Internet and the dramatic changes accompanying the de- and re-regulation of network industries, which have been subject to the close control of government institutions in most countries, have stimulated debate on applied and practical political topics, as well as a more fundamental theoretical debate within the economic profession. This internal debate addresses the importance of networks as new entities in modern developed economies throughout the world, and the implications of networks for the developing countries wishing to catch up.1 Well-known economists have set up web sites to address this topic as their special research area.2