At this site, you will find a collection of information on economic issues of networks, such as the internet, telephone and fax communications networks, the railroad network, the airline network, as well as financial exchange and credit card networks. One of the fundamental features of networks is that the value of a network service increases as the network expands, i.e., networks exhibit network externalities. For example, connecting to a telephone network with more subscribers is more desirable than connecting to a smaller network. This property of networks has important implications. Many of them are discussed in The Economics of Networks. If your interest is mainly in financial networks go directly to financial networks and electronic trading.

Since large network size is desirable, smaller networks have incentives to interconnect and form a larger network of networks. Today's telephone network in the U.S. and internet are two good examples of networks made of sub-networks. Interconnection requires technical compatibility and often it is made with specific interconnection fees paid by one sub-network to another. The issues of compatibility and interconnection fees are crucial for the success of a network of networks. They are discussed in a number of the papers below.

The economic analysis of networks also applies to industries where final goods are made of complementary components, such as the personal computer industry, where a final good is typically made of hardware, operating system software, and application software. These industries also exhibit network externalities and the issue of compatibility is of crucial importance.

To download research papers on financial networks and electronic trading or read their abstracts, click on the underlined words. In this area you will also find the recent proposal by Economides and Schwartz to institute Electronic Call Markets in major financial centers.

A bibliography on the economics of networks is available on line.

To see the full selection go to the top page (Internet Site for Network Economics).

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Last Updated: 12/1/1999 . Copyright © 1995-1999, N. Economides.

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