nep-net New Economics Papers
on Network Economics
Issue of 2011‒05‒24
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Formation of Decentralized Manufacturer-Supplier Networked Market By Yasuhiro Shirata
  2. Too Connected to Fail: The Effect of Alliance Network Structure on Farm Survival By Kirwan, Barrett; Martens, Andrea
  3. Measuring Globalization: A hierarchical network approach By David Matesanz Gomez; Guillermo J. Ortega; Benno Torgler
  4. Peer Effect, Risk-Pooling and Status Seeking: Which Matters to Gift Spending Escalation in Rural China? By Chen, Xi; Zhang, Xiaobo

  1. By: Yasuhiro Shirata
    Abstract: This paper studies trading in a two-sided market where firms strategically form a network. In a networked market, manufacturers and suppliers must be connected by links for trading. We show that if no contingent contract is available, then any pairwise Nash stable network is inefficient. Each supplier under-invests in links (a hold-up problem). If a contract contingent on direct links is available and link cost is low, then the under-investment problem solves. Furthermore, the complete network resulting in the Walrasian outcome is uniquely pairwise Nash stable. However, this outcome is also inefficient. A new hold-up problem, over-investment in links, arises.
    Date: 2011–04
  2. By: Kirwan, Barrett; Martens, Andrea
    Abstract: Exogenous, unobserved factors often confound the effects of alliance networks. More capable farmers might be less likely to exit and more likely to have a large number of alliances. In this case the negative correlation between alliance network size and exit likelihood is due to the unobserved confounder--farmer ability--not the effect of network size on exit likelihood. Recognizing the endogeneity of alliance network size when determining a farmâs survival likelihood, we employ an empirical model that accounts for the bias caused by unobserved effects. We account for time-invariant unobserved effects with individual fixed effects. We control for county-level confounding factors with a time-varying county effect. Finally, we address unobserved, time-varying confounding factors by including alliance network size as a control variable. As a control variable, alliance network size captures all remaining confounding factors. We estimate the alliance network effect by interacting the alliance network size with a weather index. In this way we isolate the âinsurance effectâ of having a large alliance network. We answer the question, âgiven a farmerâs alliance network size, what is the likelihood of exiting when experiencing an extreme weather event.â We employ USDA-Farm Services Agency administrative data to measure farmer alliances and farm entry and exit. The data provide detailed information on every farm-payment recipient since 1990, including location and organizational structure. We use the organizational-structure information to map farmer alliances and characterize alliance networks according to their size (number of nodes and number of members in each node), contractual choice (i.e. joint ventures), geographic scope, and commodity scope. Our preliminary results confirm the positive correlation between network size and farm survival.
    Keywords: networks, alliances, agriculture, policy, organizational structure, industrial organization, finance, entrepreneurship, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Farm Management, Financial Economics, Industrial Organization, Institutional and Behavioral Economics, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty, L1, L14, L26, Q1, Q14, Q18,
    Date: 2011
  3. By: David Matesanz Gomez (University of Oviedo); Guillermo J. Ortega (Universidad Nacional de Quilmes); Benno Torgler (QUT)
    Abstract: This paper investigates the business cycle co-movement across countries and regions since the middle of the last century as a measure for quantifying the ongoing globalization process of the world economy. Our methodological approach is based on analysis of a correlation matrix and the networks it contains. Such an approach summarizes the interaction and interdependence of all elements and it represents a more accurate measure of the global interdependence involved in the economic system. Our results show (1) that the dynamics of globalization has been more driven by synchronization in regional growth patterns than by the synchronization of the world economy as a whole in contrast with other empirical works and (2) that world crisis periods increase dramatically the global co movement in the world economy.
    Keywords: Globalization, regionalism, correlation matrix, clustering, synchronization
    JEL: E32 C45 O47
    Date: 2011–04–18
  4. By: Chen, Xi; Zhang, Xiaobo
    Abstract: This paper is based on our ongoing joint work with Ravi Kanbur. Xi Chen is grateful to Ravi Kanbur for invaluable comments, guidance and encouragement. For comments and suggestions, please direct correspondence to Xi Chen at
    Keywords: Social Network, Peer Effect, Risk-pooling, Status Seeking, Gift-giving, Ceremony, Agricultural and Food Policy, Agricultural Finance, Community/Rural/Urban Development, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Institutional and Behavioral Economics, International Development, Public Economics, Research Methods/ Statistical Methods, Risk and Uncertainty, I32, J22, D13, D63,
    Date: 2011–05

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