nep-net New Economics Papers
on Network Economics
Issue of 2007‒06‒02
three papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Small World of Investing: Board Connections and Mutual Fund Returns By Lauren Cohen; Andrea Frazzini; Christopher Malloy
  2. Pricing strategies in software platforms : video consoles vs. operating systems By María Fernanda Viecens
  3. Inference in a Synchronization Game with Social Interactions By Aureo de Paula

  1. By: Lauren Cohen; Andrea Frazzini; Christopher Malloy
    Abstract: This paper uses social networks to identify information transfer in security markets. We focus on connections between mutual fund managers and corporate board members via shared education networks. We find that portfolio managers place larger bets on firms they are connected to through their network, and perform significantly better on these holdings relative to their non-connected holdings. A replicating portfolio of connected stocks outperforms a replicating portfolio of non-connected stocks by up to 8.4% per year. Returns are concentrated around corporate news announcements, consistent with mutual fund managers gaining an informational advantage through the education networks. Our results suggest that social networks may be an important mechanism for information flow into asset prices.
    JEL: G10 G11 G14
    Date: 2007–05
  2. By: María Fernanda Viecens
    Abstract: We study software platforms for which the total amount that users spend depends on the twosided pricing strategy of the platform firm, and on the pricing strategy of application developers. When setting prices, developers may be constrained by one of two margins: the demand margin and the competition margin. By analyzing how these margins affect pricing strategies we find some conditions which explain features of the market of operating systems and its differences with the one corresponding to the video consoles. The problem that arises when the platform does not set prices (as an open platform) is considered. We show that policy makers should promote open source in operating systems platforms but not necessarily in video consoles. We also analyze the incentives for a platform to integrate with applications as a function of the extent of substitutability among them and provide a possible explanation for the observed fact of vertical disintegration in these industries.
    Date: 2007–05
  3. By: Aureo de Paula (Department of Economics, University of Pennsylvania)
    Abstract: This paper studies inference in a continuous-time game where an agent’s decision to quit an activity depends on the participation of other players. In equilibrium, similar actions can be explained not only by direct influences, but also by correlated factors. Our model can be seen as a simultaneous duration model with multiple decision makers and interdependent durations. We study the problem of determining existence and uniqueness of equilibrium stopping strategies in this setting. This paper provides results and conditions for the detection of these endogenous effects. First, we show that the presence of such effects is a necessary and sufficient condition for simultaneous exits. This allows us to set up a nonparametric test for the presence of such influences which is robust to multiple equilibria. Second, we provide conditions under which parameters in the game are identified. Finally, we apply the model to data on desertion in the Union Army during the American Civil War and find evidence of endogenous influences.
    Keywords: duration models; social interactions; empirical games; optimal stopping
    JEL: C10 C70 D70
    Date: 2004–10–01

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