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on Network Economics |
| By: | Rosenkranz, Stephanie; Weitzel, Utz |
| Abstract: | This paper analyzes the effects of network positions and individual risk attitudes on individuals' strategic decisions in an experiment where actions are strategic substitutes. The game theoretic basis for our experiment is the model of Bramoullé and Kranton (2007). In particular, we are interested in disentangling the influence of global, local and individual factors. We study subjects' strategic investment decisions in four basic network structures. As predicted, we find that global factors, such as the regularity of the network structure, influence behavior. However, we also find evidence that individual play in networks is to some extent boundedly rational, in the sense that coordination is influenced by local and individual factors, such as the number of (direct) neighbors, local clustering and individuals' risk attitudes. |
| Keywords: | coordination; experiment; risk aversion; Social networks; strategic substitutes |
| JEL: | C72 C91 D00 D81 D85 H41 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6855&r=net |
| By: | Domenico Delli Gatti; Mauro Gallegati; Bruce C. Greenwald; Alberto Russo; Joseph E. Stiglitz |
| Abstract: | We explore the properties of a credit network characterized by inside credit - i.e. credit relationships connecting downstream (D) and upstream (U) firms - and outside credit - i.e. credit relationships connecting firms and banks. The structure of the network changes over time due to the preferred-partner choice rule: each agent chooses the partner who charges the lowest price. The net worth of D firms turns out to be the driver of fluctuations. U production, in fact, is determined by demand of intermediate inputs on the part of D firms and production of the latter is financially constrained, i.e. determined by the availability of internal finance proxied by net worth. The output of simulations shows that at the macroeconomic level a business cycle can develop as a consequence of the complex interaction of the agents' financial conditions. We can also reproduce the main stylized facts of firms' demography, i.e. the power law distribution of firms' size and the Laplace distribution of firms' growth rates. |
| JEL: | E3 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14112&r=net |