nep-net New Economics Papers
on Network Economics
Issue of 2009‒05‒02
three papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Opinion Dynamics and Communication Networks By Sven Banisch, Tanya Araujo and Jorge Louçã
  2. Negative Externalities and Equilibrium Existence in Competitive Markets with Adverse Selection By von Siemens, Ferdinand; Kosfeld, Michael
  3. Existence of Pure Strategies Nash Equilibria in Social Interaction Games with Dyadic Externalities By Le Breton, Michel; Weber, Shlomo

  1. By: Sven Banisch, Tanya Araujo and Jorge Louçã
    Abstract: This paper examines the interplay of opinion exchange dynamics and communication network formation. An opinion formation procedure is introduced which is based on an abstract representation of opinions as k-dimensional bitstrings. Individuals interact if the difference in the opinion strings is below a defined similarity threshold dI. Depending on dI, different behaviour of the population is observed: low values result in a state of highly fragmented opinions and higher values yield consensus. The first contribution of this research is to identify the values of parameters dI and k, such that the transition between fragmented opinions and homogeneity takes place. Then, we look at this transition from two perspectives: first by studying the group size distribution and second by analysing the communication network that is formed by the interactions that take place during the simulation. The emerging networks are classified by statistical means and we find that non-trivial social structures emerge from simple rules for individual communication.
    Date: 2009–03
  2. By: von Siemens, Ferdinand (University of Amsterdam); Kosfeld, Michael (University of Frankfurt)
    Abstract: Rothschild and Stiglitz (1976) show that there need not exist a competitive equilibrium in markets with adverse selection. Building on their framework we demonstrate that externalities between agents − an agent's utility upon accepting a contract depends on the average type attracted by the respective principal − can solve the equilibrium existence problem, even when the size of the externalities is arbitrarily small. Our result highlights the degree of control a principal has over the attractiveness of his contracts as an important feature for equilibrium existence, thereby offering a new perspective on existing theories of competition in markets with adverse selection.
    Keywords: asymmetric information, competition, adverse selection, externality
    JEL: D82 D86
    Date: 2009–04
  3. By: Le Breton, Michel; Weber, Shlomo
    Abstract: In this note we introduce a general class of games where the payoff of every player are affected by her intrinsic taste for available strategic choices; intensity of her dyadic social interactions of with others in the peer group; and conformity effect. We show, that if the dyadic social influences are symmetric and the conformity effect is identical for all players, every game in our class admits a Nash equilibrium in pure strategies. Our proof relies on the fact that our game is potential (Rosenthal (1973), Monderer and Shapley (1996)). We also illustrate the universality of our result through a large spectrum of applications in economics, political science and sociology.
    Keywords: conformity effect; dyadic externalities; Nash equilibria; potential games; Social interactions
    JEL: C72 D85
    Date: 2009–04

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