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on Network Economics |
| By: | Jeanne Hagenbach (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Université Panthéon Sorbonne - Paris 1 - Université Panthéon-Sorbonne - Paris I); Frédéric Koessler (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | In this paper, we consider situations in which individuals want to choose an action close to others' actions as well as close to a payoff relevant state of nature with the ideal proximity to the common state varying across the agents. Before this coordination game with heterogeneous preferences is played, a cheap talk communication stage is offered to players who decide to whom they reveal the private information they hold about the state. The strategic information transmission taking place in the communication stage is characterized by a strategic communication network. We provide a direct link between players' preferences and the strategic communication network emerging at equilibrium, depending on the strength of the coordination motive and the prior information structure. Equilibrium strategic communication networks are characterized in a very tractable way and compared in term of efficiency. In general, a maximal strategic communication network may not exist and communication networks cannot be ordered in the sense of Pareto. However, expected social welfare always increases when the communication network expands. Strategic information transmission can be improved when group or public communication is allowed, and/or when information is certifiable. |
| Keywords: | cheap talk ; coordination ; partially verifiable types ; public and private communication |
| Date: | 2011–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-00586847&r=net |
| By: | Tilman Dette; Scott Pauls; Daniel N. Rockmore |
| Abstract: | Globalization has created an international financial network of countries linked by trade in goods and assets. These linkages allow for more efficient resource allocation across borders, but also create potentially hazardous financial interdependence, such as the great financial distress caused by the 2010 threat of Greece's default or the 2008 collapse of Lehman Brothers. Increasingly, the tools of network science are being used as a means of articulating in a quantitative way measures of financial interdependence and stability. In this paper, we employ two network analysis methods on the international investment network derived from the IMF Coordinated Portfolio Investment Survey (CPIS). Via the "error and attack" methodology [1], we show that the CPIS network is of the "robust- yet-fragile" type, similar to a wide variety of evolved networks [1, 2]. In particular, the network is robust to random shocks but very fragile when key financial centers (e.g., the United States and the Cayman Islands) are affected. Using loss-given-default dynamics [3], "extinction analysis" simulations show that interdependence increased from 2001 to 2007. Our simulations further indicate that default by a single relatively small country like Greece can be absorbed by the network, but that default in combination with defaults of other PIGS countries (Portugal, Ireland, and Spain) could lead to a massive extinction cascade in the global economy. Adaptations of this approach could form the basis for risk metrics designed to monitor and guide policy formulation for the stability of the global economy. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1104.4249&r=net |
| By: | Talat S. Genc (Department of Economics,University of Guelph); Pierre-Olivier Pineau (Management Sciences, HEC-Montreal); Ege Yazgan (Department of Economics, Istanbul Bilgi University) |
| Abstract: | We investigate whether trade has any effect on the price formation process in a specific electricity market, and identify interconnected markets that have higher impacts on prices in that market. In particular, we study Ontario wholesale electricity market and its trade with 12 interconnected markets including New York, Michigan, and Minnesota markets. We find that imports are unambiguously related to prices, while exports are not. Furthermore, imports have a positive and significant relationship with prices. We argue that the results are associated with auction design, production constraints, and technological differences. Out of the 12 studied interties, only three have a significant impact on price, two of which are the largest ones. |
| Keywords: | electricity trade; simultaneous trade; transmission network; electricity prices; nonlinear Granger causality; Ontario, New York, Michigan, Manitoba, Quebec wholesale electricity markets. |
| JEL: | C5 F14 L94 Q4 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2011-02.&r=net |
| By: | Ainhoa Aparicio |
| Abstract: | This paper explores the existence of network effects in migrants' remittance behavior. In this study, networks are defined as groups of immigrants from the same country that live in the same locality. Using the National Immigrant Survey, a unique database for Spain, immigrants are found to be more likely to remit and to remit more money if they belong to high remitting country groups. This finding sheds new light on the determinants of the decision to remit, as well as on the scope of immigrant networks. |
| Keywords: | Immigrant networks; remittances; Spain |
| JEL: | J61 F22 O15 A14 E21 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:202&r=net |
| By: | Agata Fronczak; Piotr Fronczak |
| Abstract: | Analyzing real data on international trade covering the time interval 1950-2000, we show that in each year over the analyzed period the network is a typical representative of the ensemble of maximally random weighted networks, whose directed connections (bilateral trade volumes) are only characterized by the product of the trading countries' GDPs. It means that time evolution of this network may be considered as a continuous sequence of equilibrium states, i.e. quasi-static process. This, in turn, allows one to apply the linear response theory to make (and also verify) simple predictions about the network. In particular, we show that bilateral trade fulfills fluctuation-response theorem, which states that the average relative change in import (export) between two countries is a sum of relative changes in their GDPs. Yearly changes in trade volumes prove that the theorem is valid. Supported by the well-known qualitative findings about economic crises, we argue that the theorem provides valuable quantitative insights into the mechanisms underlying the emergence of worldwide crises. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1104.2606&r=net |