nep-net New Economics Papers
on Network Economics
Issue of 2008‒01‒26
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Social Network Capital, Economic Mobility and Poverty Traps By Chantarat, Sommarat; Barrett , Christopher
  2. Intra-Household Effects on Demand for Telephone Service: Empirical Evidence By Huang, Ching-I
  4. Performance measures of retail banking networks: a decision support tool By Aude Hubrecht-Deville; Hervé Leleu

  1. By: Chantarat, Sommarat; Barrett , Christopher
    Abstract: The paper explores the role social network capital might play in facilitating poor agents’ escape from poverty traps. We model and simulate endogenous network formation among households heterogeneously endowed with both traditional and social network capital who make investment and technology choices over time in the absence of financial markets and faced with multiple production technologies featuring different fixed costs and returns. We show that social network capital can serve as either a complement to or a substitute for productive assets in facilitating some poor households’ escape from poverty. However, the voluntary nature of costly social network formation also creates both involuntary and voluntary exclusionary mechanisms that impede some poor households’ exit from poverty. Through numerical simulation, we show that the ameliorative potential of social networks therefore depends fundamentally on broader socioeconomic conditions, including the underlying wealth distribution in the economy, that determine the feasibility of social interactions and the net intertemporal benefits of social network formation. In some settings, targeted public transfers to the poor can crowd-in private resources by inducing new social links that the poor can exploit to escape from poverty.
    JEL: O1 Z1 I3
    Date: 2008–01
  2. By: Huang, Ching-I
    Abstract: I present a game-theoretical model to estimate consumption demand, accounting for intra-household interaction among household members. Although multiple Nash equilibria of consumption decisions may exist in a household, model parameters are pointwise identified from household-level data for households with only two members. I propose a semiparametric maximum likelihood estimator and apply it to empirically analyze the subscription decision for cellular phone service in Taiwan. On average, a consumer's probability of subscribing to cellular service rises 35 percentage points when the other household member chooses to subscribe. This result suggests the existence of intra-household network effects on cellular phone consumption. The intra-household effect increases in household income, but decreases in the number of kids and the age difference in a household.
    Keywords: consumption externality; multiple Nash equilibria; demand estimation; mobile phone service; cellular phone service; network effect
    JEL: D13 D12 C35
    Date: 2008–01
  3. By: Miguel A. Meléndez-Jiménez (Universidad de Alicante)
    Abstract: This paper presents a model in which players interact via the formation of costly links and the benefits of bilateral interactions are determined by a coordination game. A novel contribution of this paper is that the fraction of the cost borne by each player involved in a bilateral link is not fixed exogenously, but results from bargaining. We analyze the model both in a static and a dynamic setting. Whereas the static game has multiplicity of equilibria, we show that only one is stochastically stable.
    Keywords: Coordination; Nash bargaining solution; Risk-dominance; Stochastic stability
    JEL: C72 C73 C78
    Date: 2007–12
  4. By: Aude Hubrecht-Deville (Université de Bourgogne); Hervé Leleu (CNRS-LEM, Université Catholique de Lille)
    Abstract: In this paper, we apply a standard model of performance evaluation to the retail banking industry. In this framework, the global economic performance is broken down into technical efficiency related to the optimal use of resources and price efficiency related to the optimal choice of a product-mix. Our main contribution is twofold. First we adapt this traditional framework to the retail banking network by giving a relevant interpretation of the efficiency measures at the branch manager and at the regional top management levels. Second, we relate explicitly the product-mix efficiency to the market environment and to the size of branches. We postulate that branches in different environments could face different production technologies and that optimal product-mixes could vary with the size of the branches. We take a sample size of 1585 branches from a single bank brand breaking down in 17 French regions. We use a nonparametric approach to model the production technologies and to identify optimal benchmarks. Our main objective is to end up with a decision support tool for the top bank management in order to plan product-mix strategies and to give the right incentives to branches’ managers. This tool should prove useful since, in retail banking networks, such tools have to be simple, robust, easy to control, and adapted to the vertical organization of the banking network.
    Date: 2007–12

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