nep-net New Economics Papers
on Network Economics
Issue of 2011‒02‒05
five papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Myopic or farsighted : bilateral trade agreements among three symmetric countries By Tsubota, Kenmei; Kawasaki, Yujiro
  2. Dynamic Aspects of Teenage Friendships and Educational Attainment By Patacchini, Eleonora; Rainone, Edoardo; Zenou, Yves
  3. Why royalties ? Evidence from French distribution networks By Muriel Fadairo
  4. A Simple Bargaining Procedure for the Myerson Value By Noemí Navarro; Andrés Perea
  5. An Enhanced Concave Program Relaxation for Choice Network Revenue Management By Joern Meissner; Arne Strauss; Kalyan Talluri

  1. By: Tsubota, Kenmei; Kawasaki, Yujiro
    Abstract: We examine network formation via bilateral trade agreement (BTA) among three symmetric countries. Each government decides whether to form a link or not via a BTA depending on the differential of ex-post and ex-ante sum of real wages in the country. We model the governmental decision in two forms, myopic and farsighted and analyze the effects on the BTA network formation. Firstl, we find that both myopic and farsighted games never induce the formation of star networks nor empty networks. Second, the networks resulting from myopic game coincides with those resulting from farsighted games.
    Keywords: International trade, International agreements, Trade policy, Endogenous network formation, Bilateral trade agreement, Myopic and farsighted behavior
    JEL: F14 F15
    Date: 2011–01
  2. By: Patacchini, Eleonora (La Sapienza University of Rome, EIEF, IZA and CEPR.); Rainone, Edoardo (La Sapienza University of Rome); Zenou, Yves (Stockholm University, Research Institute of Industrial Economics (IFN), GAINS, IZA and CEPR. Email:)
    Abstract: We study peer effects in education. We first develop a network model that predicts a relationship between own education and peers’ education as measured by direct links in the social network. We then test this relationship using the four waves of the AddHealth data, looking at the impact of school friends nominated in the first wave in 1994-1995 on own educational outcome reported in the fourth wave in 2007-2008. We find that there are strong and persistent peer effects in education since a standard deviation increase in peers’ education attainment translates into roughly a 10 percent increase of a standard deviation in the individual’s education attainment (roughly 3.5 more months of education). We also find that peer effects are in fact significant only for adolescents who were friends in grades 10-12 but not for those who were friends in grades 7-9. This might indicate that social norms are important in educational choice since the individual’s choice of college seems to be influenced by that of friends in the two last years of high school.
    Keywords: Social networks; education; peer effects; identification strategy
    JEL: C21 I21 Z13
    Date: 2011–01–25
  3. By: Muriel Fadairo (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: This empirical note deals with the contractual design of relationships in distribution networks. In the framework of agency theory, I study the royalty rate as an incentive device for the upstream firm in maintaining brand-name value, using recent French data to estimate probit models. The results are consistent with the analytical framework.
    Keywords: Vertical Relationships; Distribution Networks; Contract Design; Two-sided moral hazard
    Date: 2011
  4. By: Noemí Navarro (Departement d’Économique et GREDI, Université de Sherbrooke); Andrés Perea (Department of Quantitative Economics, Maastricht University)
    Abstract: We consider situations where the cooperation and negotiation possibilities between pairs of agents are given by an undirected graph. Every connected component of agents has a value, which is the total surplus the agents can generate by working together. We present a simple, sequential, bilateral bargaining procedure, in which at every stage the two agents in a link (i, j) bargain about their share from cooperation in the connected component they are part of. We show that, if the marginal value of a link is increasing in the number of links in the connected component it belongs to, then this procedure yields exactly the Myerson value payoff (Myerson, 1977) for every player.
    Keywords: Myerson value, networks, bargaining, cooperation
    JEL: C71 C72
    Date: 2010–11–15
  5. By: Joern Meissner (Department of Management Science, Lancaster University Management School); Arne Strauss (Department of Management Science, Lancaster University Management School); Kalyan Talluri (ICREA & Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain)
    Abstract: The network choice revenue management problem models customers as choosing from an offerset, and the firm decides the best subset to offer at any given moment to maximize expected revenue. The resulting dynamic program for the firm is intractable and approximated by a deterministic linear program called the CDLP which has an exponential number of columns. However, under the choice-set paradigm when the segment consideration sets overlap, the CDLP is difficult to solve. Column generation has been proposed but finding an entering column has been shown to be NP-hard. In this paper, starting with a concave program formulation based on segment-level consideration sets called SDCP, we add a class of valid inequalities called product cuts, that project onto subsets of intersections. In addition we propose a natural direct tightening of the SDCP called kSDCP, and compare the performance of both methods on the benchmark data sets in the literature. Both the product cuts and the kSDCP method are very simple and easy to implement, work with general discrete choice models and are applicable to the case of overlapping segment consideration sets. In our computational testing SDCP with product cuts achieves the CDLP value at a fraction of the CPU time taken by column generation and hence has the potential to be scalable to industrial-size problems.
    Keywords: operations research, marketing, bid prices, yield management, heuristics, discrete-choice, network revenue management
    JEL: C61 M11 M31 L93 L83
    Date: 2011–01

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