nep-net New Economics Papers
on Network Economics
Issue of 2010‒09‒11
twelve papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Financial Connections and Systemic Risk By Allen, F.; Babus, a.; Carletti, E.
  2. Aviation, Space or Aerospace? Exploring the knowledge networks of two industries in den Netherlands. By Tom Broekel; Ron Boschma
  3. The Optimal Defense of Networks of Targets By Dan Kovenock; Brian Roberson
  4. A Comparison between Political Claims Analysis and Discourse Network Analysis: The Case of Software Patents in the European Union By Philip Leifeld; Sebastian Haunss
  5. Agglomeration and interregional network effects on European R&D productivity By Attila Varga; Dimitrios Pontikakis; George Chorafakis
  6. Coalitions and networks By Fox, Jonathan A
  7. An Analytical Model of a Vertically Separated Railway Market By Markus Lang; Marc Laperrouza; Matthias Finger
  8. Testing Unilateral and Bilateral Link Formation By Margherita Comola; Marcel Fafchamps
  9. Different Approaches to Influence Based on Social Networks and Simple Games By Michel Grabisch; Agnieszka Rusinowska
  10. Social Networks, Job Search Methods and Reservation Wages: Evidence for Germany By Caliendo, Marco; Schmidl, Ricarda; Uhlendorff, Arne
  11. Essays on Experimental Bubble Markets. By Powell, O.R.
  12. The Economics of Number Portability: Switching Costs and Two-Part Tariffs By Aoki, Reiko; Small, John

  1. By: Allen, F.; Babus, a.; Carletti, E. (Tilburg University, Center for Economic Research)
    Abstract: We develop a model where institutions form connections through swaps of projects in order to diversify their individual risk. These connections lead to two different network structures. In a clustered network groups of financial institutions hold identical portfolios and default together. In an unclustered network defaults are more dispersed. With long term finance welfare is the same in both networks. In contrast, when short term finance is used, the network structure matters. Upon the arrival of a signal about banks’ future defaults, investors update their expectations of bank solvency. If their expectations are low, they do not roll over the debt and there is systemic risk in that all institutions are early liquidated. We compare investors’ rollover decisions and welfare in the two networks.
    Keywords: Financial networks;diversification;short term finance;rollover risk
    JEL: G21
    Date: 2010
  2. By: Tom Broekel (Section of Economic Geography, Faculty of Geosciences, Utrecht University); Ron Boschma (Section of Economic Geography, Faculty of Geosciences, Utrecht University)
    Abstract: Little effort has been made to identify industries’ knowledge networks, and to what extent knowledge relations occur between actors in different industries. This paper presents a network study on the Dutch aviation and space industry. Both industries are often treated as similar and categorized as aerospace accordingly, although they tend to rely on different knowledge bases. Our study shows that the structure of the knowledge networks differs between the two industries, and few knowledge linkages have been established between the two. Our findings also suggest that the gap between the two industries’ knowledge networks is more pronounced for market knowledge than for technological knowledge. Non-profit organizations do seem to bridge the knowledge networks of the two industries.
    Date: 2010–08
  3. By: Dan Kovenock; Brian Roberson
    Abstract: This paper examines a game-theoretic model of attack and defense of multiple networks of targets in which there exist intra-network strategic complementarities among targets. The defender’s objective is to successfully defend all of the networks and the attacker’s objective is to successfully attack at least one network of targets. In this context, our results highlight the importance of modeling asymmetric attack and defense as a conflict between “fully” strategic actors with endogenous entry and force expenditure decisions as well as allowing for general correlation structures for force expenditures within and across the networks of targets.
    Keywords: Asymmetric Conflict, Attack and Defense, Weakest-Link, Best-Shot
    JEL: C7 D74
    Date: 2010–08
  4. By: Philip Leifeld (Max Planck Institute for Research on Collective Goods, Bonn); Sebastian Haunss (Department of Politics and Management, University of Konstanz)
    Abstract: The study of policy discourse comprises actor-centered and content-oriented approaches. We attempt to close the gap between the two kinds of approaches by introducing a new methodology for the analysis of political discourse called Discourse Network Analysis. It is based on social network analysis and qualitative content analysis and takes an entirely relational perspective. Political discourse can be analyzed in a dynamic way, and the approach makes previously unobservable cleavage lines and alignments measurable at the actor level, at the level of the contents of a discourse, and a combined layer. We compare discourse network analysis with political claims analysis, a competing method, and apply both methods to the European-level discourse on software patents. Our results demonstrate how an anti-softwarepatent coalition was mobilized and how it gained control over important frames, while the well-organized pro-software-patent discourse coalition was not able to gain sovereignty over the discourse.
    Keywords: Software Patents, Intellectual Property Rights, Discourse Network Analysis, Social Network Analysis, Political Discourse, Policy Networks, Public Policy Analysis, Social Movements, Political Claims Analysis
    Date: 2010–05
  5. By: Attila Varga (Department of Economics and Regional Studies, University of Pécs); Dimitrios Pontikakis (Institute for Prospective Technological Studies, Joint Research Centre, European Commission Seville, Spain); George Chorafakis (Research Directorate-General, European Commission Brussels, Belgium)
    Abstract: This paper explores the effects of intra-regional agglomeration and interregional networking on the productivity of R&D across EU regions. The paper is based on the spatial econometric modelling framework presented in Varga (2000), and further develops a methodology for estimating the dynamic effects of agglomeration and interregional networks on R&D productivity in regional knowledge creation (measured by patent applications and publications) at the level of EU regions. This empirical modelling framework is applied to classify EU regions into different tiers according to the strengths of their agglomeration effects. These effects are then compared to the network effects of interregional connectedness as reflected in regional participation in the EU Framework Programme for Research. The estimated model is used then for an assessment of the impacts of EU Framework Programme expenditures on technological development and for carrying out policy impact simulations.
    Keywords: Agglomeration, network effects, R&D productivity
    JEL: O18 O33 R11
    Date: 2010–06
  6. By: Fox, Jonathan A
    Abstract: Coalitions are partnerships among distinct actors that coordinate action in pursuit of shared goals. But what distinguishes them from other kinds of partnerships? The term is widely used to describe joint ventures in a wide range of arenas, most notably in international geopolitics or political party competition and governance. The literature on coalitions is dominated by discussions of war and peace, election campaigns, and parliamentary dynamics. Just as in war or politics, successful collective action in civil society often depends on the formation and survival of coalitions – insofar as the whole is often greater than the sum of the parts.
    Keywords: Globalization and Regulation, Social Movements
    Date: 2009–12–01
  7. By: Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Marc Laperrouza (Management of Network Industries, Swiss Federal Institute of Technology Lausanne (EPFL)); Matthias Finger (Management of Network Industries, Swiss Federal Institute of Technology Lausanne (EPFL))
    Abstract: This paper presents a game-theoretic model of a liberalized railway market in which train operation and ownership of infrastructure are fully vertically separated. The objective of this paper is to analyze how the regulatory agency will socially optimally set the charges that operators have to pay to the infrastructure manager for access to the tracks and how these charges change with increased competition in the railway market. Our analysis shows that an increased number of competitors in the freight and/or passenger segment reduces prices per kilometer and increases total output in train kilometers. The regulatory agency reacts to more competition with a reduction in access charges in the corresponding segment. Consumers benefit through lower prices while the effect on the operators' profits is ambiguous and depends on the degree of competition. We further show that social welfare always increases through more competition in the freight and/or passenger segment. Finally, social welfare is higher under two-part tariffs than under one-part tariffs if rising public funds is costly to society.
    Keywords: Access charges, optimal pricing, railways, regulation, vertical integration
    JEL: D40 L22 L51 L92
    Date: 2010–09
  8. By: Margherita Comola; Marcel Fafchamps
    Abstract: The literature has shown that network architecture depends crucially on whether links are formed unilaterally or bilaterally, that is, on whether the consent of both nodes is required for a link to be formed. They propose a test of whether network data is best seen as an actual link or willingness to link and, in the latter case, whether this link is generated by an unilateral o rbilateral link formation process. They illustrate this test using survey answers to a risk-sharing question inTanzania. They find that the bilateral link formation model fits the data better than the unilateral model, but the data are best interpreted as willingness to link rather than an actual link. They then expand the model to include self-censoring and find that models with self-censoring fit the data best. [Working Paper No. 236]
    Keywords: network architecture; pairwise stability; risk sharing
    Date: 2010
  9. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: We present an overview of research on a certain model of influence in a social network. Each agent has to make an acceptance/rejection decision, and he has an inclination to choose either the yes-action or the no-action. The agents are embedded in a social network which models influence between them. Due to the influence, a decision of an agent may differ from his preliminary inclination. Such a transformation between the agents' inclinations and their decisions are represented by an influence function. Follower functions encode the players who constantly follow the opinion of a given unanimous coalition. We examine properties of the influence and follower functions and study the relation between them. The model of influence is also compared to the framework of command games in which a simple game is built for each agent. We study the relation between command games and influence functions. We also define influence indices and determine the relations between these indices and some well-known power indices. Furthermore, we enlarge the set of possible yes/no actions to multi-choice games and investigate the analogous tools related to influence in the multi-choice model.
    Keywords: influence, social network, influence function, command game
    Date: 2010
  10. By: Caliendo, Marco (IZA); Schmidl, Ricarda (IZA); Uhlendorff, Arne (University of Mannheim)
    Abstract: In this paper we analyze the relationship between social networks and the job search behavior of unemployed individuals. It is believed that networks convey useful information in the job search process such that individuals with larger networks should experience a higher productivity of informal search. Hence, job search theory suggests that individuals with larger networks use informal search channels more often and substitute from formal to informal search. Due to the increase in search productivity, it is also likely that individuals set higher reservation wages. We analyze these relations using a novel data set of unemployed individuals in Germany containing extensive information on job search behavior and direct measures for the social network of individuals. Our findings confirm theoretical expectations. Individuals with larger networks use informal search channels more often and shift from formal to informal search. We find that informal search is mainly considered a substitute for passive, less cost intensive search channels. In addition to that, we find evidence for a positive relationship between the network size and reservation wages.
    Keywords: job search behavior, unemployment, social networks
    JEL: J64
    Date: 2010–09
  11. By: Powell, O.R. (Tilburg University)
    Abstract: Markets play at least three important roles in the economy. First, they allow for exchange. Second, markets allow for the pooling and reduction of risk. Third, markets can aggregate information. It is this third function of markets that is the study of this thesis. Through their transaction prices, markets have the potential to aggregate diverse information and provide signals to agents about the relative value of different goods and services. The problem, however, is that there is no guarantee that market prices will correctly reflect fundamentals. In fact, there is no guarantee that they will do so even approximately correctly. One such pattern in which prices can deviate from fundamentals is a bubble. Bubbles often leave chaos in their wake. Those caught unaware by the crash in prices experience significant losses that often lead to cascading effects in other parts of the economy. The direct cost of a bubble is the over-investment that results from the temporary over-pricing of the asset. The indirect costs of a bubble are the consequences of the typically large and rapid redistributions of wealth that occur when prices crash at the end of the bubble. These large fluctuations in wealth can lead to social disruption and have spillover effects on the rest of the economy. This thesis consists of three experimental studies that examine different aspects of bubble markets. The recent convulsions in the global economic system have shown that there are strong concerns regarding the ability of the market system to “get things right''. This thesis is a small step forward towards better understanding that system and improving its performance.
    Date: 2010
  12. By: Aoki, Reiko; Small, John
    Abstract: This paper interprets number portability as a reduction of switching costs in a model of competition between telephone companies. We identify several cases by their cost and demand characteristics and show that social benefit of number portability are not guaranteed. Analysis using two-part tariff highlights the effect of how the technological cost of switching cost reduction effects the final market allocation.
    Date: 2010–08

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