nep-net New Economics Papers
on Network Economics
Issue of 2012‒01‒03
eighteen papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Issues in on-line advertising and competition policy: a two-sided market perspective By Emilio Calvano; Bruno Jullien
  2. Diffusion and contagion in networks with heterogeneous agents and homophily By Matthew O. Jackson; Dunia López Pintado
  3. Seeking Harmony Amidst Diversity: Consensus Building with Network Externalities By Junichiro Ishida; Chia-Hui Chen
  4. Out of Sight, Out of Mind:The Value of Political Connections in Social Networks By Quoc-Anh Do; Bang Dang Nguyen; Yen-Teik Lee; Kieu-Trang Nguyen
  5. Peer effects identified through social networks. Evidence from Uruguayan schools By Gioia De Melo
  6. Inter-firm R&D networks in the global pharmaceutical biotechnology industry during 1985 - 1998: A conceptual and empirical analysis By Krogmann, Yin; Schwalbe, Ulrich
  7. Null Models of Economic Networks: The Case of the World Trade Web By Giorgio Fagiolo; Tiziano Squartini; Diego Garlaschelli
  8. Modeling the International-Trade Network: A Gravity Approach By Marco Duenas; Giorgio Fagiolo
  9. A relational approach to knowledge spillovers in biotech. Network structures as drivers of inter-organizational citation patterns By Ron Boschma; Pierre-Alexandre Balland; Dieter Kogler
  10. Determinants of the Optimal Network Configuration and the Implications for Coordination By Patricia Deflorin; Helmut Dietl; Markus Lang; Eric Lucas
  11. Behavioural patterns in social networks By Anna Contea; Daniela T. Di Cagno; Emanuela Sciubbad
  12. The link approach to measuring consumer surplus in transport networks By Maarten van 't Riet
  13. Social Influence in Trustors’ Neighborhoods By Luigi Luini; Annmaria Nese; Patrizia Sbriglia
  14. Network mechanisms and social ties in markets for low- and unskilled jobs: (theory and) evidence from North-India By Iversen, Vegard Iversen; Torsvik, Gaute
  15. From wires to partners: How the Internet has fostered R&D collaborations within firms By Chris CM Forman; Nicolas van Zeebroeck
  16. The determinants of social capital on facebook By Aslý Ertan
  17. Stable syndicates of factor owners and distribution of social output: a Shapley value approach By Fabrice Valognes; Hélène Ferrer; Guillermo Owen
  18. When strong ties are strong Networks and youth labor market entry By Kramarz, Francis; Nordström Skans, Oskar

  1. By: Emilio Calvano; Bruno Jullien
    Date: 2011
  2. By: Matthew O. Jackson (Department of Economics, Stanford University, Santa Fe Institute, and CIFAR); Dunia López Pintado (Department of Economics, Universidad Pablo de Olavide)
    Abstract: We study how a behavior (an idea, buying a product, having a disease, adopting a cultural fad or a technology) spreads among agents in an a social network that exhibits segregation or homophily (the tendency of agents to associate with others similar to themselves). Individuals are distinguished by their types (e.g., race, gender, age, wealth, religion, profession, etc.) which, together with biased interaction patterns, induce heterogeneous rates of adoption. We identify the conditions under which a behavior diffuses and becomes persistent in the population. These conditions relate to the level of homophily in a society, the underlying proclivities of various types for adoption or infection, as well as how each type interacts with its own type. In particular, we show that homophily can facilitate diffusion from a small initial seed of adopters.
    Keywords: Diffusion, Homophily, Segregation, Social Networks
    JEL: D85 D83 C70 C73 L15 C45
    Date: 2011–12
  3. By: Junichiro Ishida; Chia-Hui Chen
    Abstract: A group of individuals, with a potential conflict of interest, face a choice among alternatives. There is a network externality such that the chosen alternative yields value only if sufficiently many individuals get on board. Their preferences for each alternative and the benefit derived from a successfully formed network are known only privately and might vary between the players who determine whether to make their choices early or late. We characterize the equilibrium timing of adoption as well as the efficient timing which maximizes the total expected payoff. We also show that the efficient timing of adoption can be implemented by a simple fee scheme. The analysis gives an insight into why consensus is often hard-won in some societies and suggests a potential role of social norms in improving the efficiency.
    Date: 2011–12
  4. By: Quoc-Anh Do (School of Economics, Singapore Management University, Singapore 178903); Bang Dang Nguyen (Finance and Accounting Group, Judge Business School, University of Cambridge, Cambridge CB2 1AG, U.K); Yen-Teik Lee (Department of Finance, Lee Kong Chian School of Business, Singapore Management University, Singapore 178899); Kieu-Trang Nguyen (SPEA, Indiana University, Bloomington, IN 47401, U.S.A)
    Abstract: This paper investigates the impact of social-network connections to politicians on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Using the Regression Discontinuity Design based on close elections from 2000 to 2008, we identify that a director’s connection to an elected congressman causes a Weighted Average Treatment Effect on Cumulative Abnormal Returns of -2.65% surrounding the election date. The effect is robust and consistent through various specifications, parametric and nonparametric, with different outcome measures and social network definitions, and across many subsamples. We find evidence to support the hypothesis that firms benefit more when connected politicians remain in state politics than when they move to federal office. Overall, our study identifies the value of political connections through social networks and uncovers its variation across different states and between state and federal political environments.
    Keywords: Social network; political connection; close election; regression discontinuity design; firm value.
    JEL: D72 D73 D85 G3 G10 G11 G14 G30 C21
    Date: 2011–12
  5. By: Gioia De Melo
    Abstract: This paper provides evidence on peer effects in educational achievement exploiting for the first time a unique data set on social networks within primary schools in Uruguay. The relevance of peer effects in education is still largely debated due to the identification challenges that the study of social interactions poses. I adopt a recently developed identification method that exploits detailed information on social networks, i.e. individual-specific peer groups. This method enables me to disentangle endogenous effects from contextual effects via instrumental variables that emerge naturally from the network structure. Correlated effects are controlled, to some extent, by classroom fixed effects. I find significant endogenous effects in standardized tests for reading and math. A one standard deviation increase in peers’ test score increases the individual’s test score by 40% of a standard deviation. This magnitude is comparable to the effect of having a mother that completed college. By means of a simulation I illustrate that when schools are stratified by socioeconomic status peer effects may operate as amplifiers of educational inequalities.
    JEL: I21 I24 O1
    Date: 2011–11
  6. By: Krogmann, Yin; Schwalbe, Ulrich
    Abstract: This paper analyses a large database on inter-firm R&D cooperation formed in the pharmaceutical biotechnology industry during the period 1985 - 1998. The results indicate that network size largely grows, whereas the density of the network declines during the periods. In the network analysis that emphasizes individual structural positions, the empirical results show that small biotechnological companies had a crucial bridging role for the large pharmaceutical firms in the second half of the 1980s. In the 1990s, the bridge role of biotechnology companies became less important and established pharmaceutical companies developed into dominant start players with many collaborators while holding central roles in the research network. The current analysis also shows that degree-based and betweenness-based network centralization are both low implying that the overall positional advantages are relatively equally distributed in the inter-firm R&D network of the pharmaceutical biotechnology industry. --
    Keywords: R&D networks,pharmaceutical biotechnology,network analysis,conceptual centrality,network visualization software
    JEL: C88 D85 L24 L65 O32
    Date: 2011
  7. By: Giorgio Fagiolo; Tiziano Squartini; Diego Garlaschelli
    Abstract: In all empirical-network studies, the observed properties of economic networks are informative only if compared with a well-defined null model that can quantitatively predict the behavior of such properties in constrained graphs. However, predictions of the available null-model methods can be derived analytically only under assumptions (e.g., sparseness of the network) that are unrealistic for most economic networks like the World Trade Web (WTW). In this paper we study the evolution of the WTW using a recently-proposed family of null network models. The method allows to analytically obtain the expected value of any network statistic across the ensemble of networks that preserve on average some local properties, and are otherwise fully random. We compare expected and observed properties of the WTW in the period 1950-2000, when either the expected number of trade partners or total country trade is kept fixed and equal to observed quantities. We show that, in the binary WTW, node-degree sequences are sufficient to explain higher-order network properties such as disassortativity and clustering-degree correlation, especially in the last part of the sample. Conversely, in the weighted WTW, the observed sequence of total country imports and exports are not sufficient to predict higher-order patterns of the WTW. We discuss some important implications of these findings for international-trade models.
    Keywords: World Trade Web; Null Models of Networks; Complex Networks; International Trade
    JEL: D85 C49 C63 F10
    Date: 2011–12–15
  8. By: Marco Duenas; Giorgio Fagiolo
    Abstract: This paper investigates whether the gravity model (GM) can explain the statistical properties of the International Trade Network (ITN). We fit data on international-trade flows with a GM specification using alternative fitting techniques and we employ GM estimates to build a weighted predicted ITN, whose topological properties are compared to observed ones. Furthermore, we propose an estimation strategy to predict the binary ITN with a GM. We find that the GM successfully replicates the weighted-network structure of the ITN, only if one fixes its binary architecture equal to the observed one. Conversely, the GM performs very badly when asked to predict the presence of a link, or the level of the trade flow it carries, whenever the binary structure must be simultaneously estimated.
    Keywords: International Trade Network; Gravity Equation; Weighted Network Analysis; Topological Properties; Econophysics
    JEL: F10 D85
    Date: 2011–12–15
  9. By: Ron Boschma; Pierre-Alexandre Balland; Dieter Kogler
    Abstract: In this paper, we analyze the geography of knowledge spillovers in biotech by investigating the way in which knowledge ties are organized. Following a relational account on knowledge spillovers, we depict knowledge networks as complex evolving structures that build on pre-existing knowledge and previously formed ties. In economic geography, there is still little understanding of how structural network forces (like preferential attachment and closure) shape the structure and formation of knowledge spillover networks in space. Our study investigates the knowledge spillover networks of biotech firms by means of inter-organizational citation patterns based on USPTO biotech patents in the years 2008-2010. Using a Stochastic Actor-Oriented Model (SAOM), we explain the driving forces behind the decision of actors to cite patents produced by other actors. Doing so, we address directly the endogenous forces of knowledge dynamics.
    Keywords: knowledge spillovers, network structure, patent citations, biotech, proximity
    JEL: B15 R11 R12
    Date: 2011–12
  10. By: Patricia Deflorin (Department of Business Administration, University of Zurich); Helmut Dietl (Department of Business Administration, University of Zurich); Markus Lang (Department of Business Administration, University of Zurich); Eric Lucas (Department of Business Administration, University of Zurich)
    Abstract: This paper develops a simulation model to compare the performance of two stylized manufacturing networks: the lead factory network (LFN) and the archetype network (AN). The model identifies the optimal network configuration and its implications for coordination mechanisms. Using an NK simulation model to differentiate between exogenous factors (configuration) and endogenous factors (coordination), we find low complexity of the production process, low transfer costs and high search costs, as well as a larger number of manufacturing plants benefit LFN compared to AN. Optimally coordinating the chosen network configuration of LFN might require to fully transfer knowledge in the short run but to transfer nothing in the long run. Moreover, a late knowledge transfer from the lead factory to the plants increases the pre-transfer performance of LFN but results in a larger performance drop, yielding a lower short-run but a higher long-run performance of LFN.
    Keywords: Manufacturing network, manufacturing plant, global operations management, lead factory, knowledge transfer
    Date: 2011–12
  11. By: Anna Contea (Max Planck Institute of Economics, Jena); Daniela T. Di Cagno (LUISS University, Rome); Emanuela Sciubbad (Birkbeck College, University of London)
    Abstract: In this paper, we focus on the analysis of individual decision making for the formation of social networks, using experimentally generated data. We first analyse the determinants of the individual demand for links under the assumption of agents' static expectations. The results of this exercise subsequently allow us to identify patterns of behaviour that can be subsumed in three strategies of link formation: 1) reciprocator strategy - players propose links to those from whom they have received link proposals in the previous round; 2) myopic best response strategy - players aim to profit from maximisation; 3) opportunistic strategy - players reciprocate link proposals to those who have the largest number of connections. We find that these strategies explain approximately 76% of the observed choices. We finally estimate a mixture model to highlight the proportion of the population who adopt each of these strategies.
    Keywords: Network formation, Experiments, Multivariate probit models, Mixture models
    JEL: C33 C35 C90 D85
    Date: 2011–12–20
  12. By: Maarten van 't Riet
    Abstract: <p>Should one calculate user benefits from changes in door-to-door journeys or from changes in the use of separate links of the network? </p><p>The second approach is often discarded for its perceived inability to deal with new links and the OD-matrix approach is favoured. Differences arise when the set of used routes changes. A consumer model containing a general static transportation network with explicit non-negativity constraints serves as a basis for welfare measures expressed in shadow prices. The approximation error when applying the link approach need not be too severe. A rehabilitation of the link approach may be in order.</p>
    JEL: D61 H54 R42
    Date: 2011–12
  13. By: Luigi Luini; Annmaria Nese; Patrizia Sbriglia
    Abstract: Economists have often analysed the impact that the spread of beliefs and behaviors have on the equilibrium and performance of markets. Recent experimental studies on peer pressure in groups of agents interacting in investment and gift exchange games (Mittone and Ploner, 2011, Gachter et al. 2010) have proved that the imitation of partners’ behaviors can have substantial effects on reciprocity, thus confirming that the effects of information also need to be studied in games where social preferences play a fundamental role. The aim of this paper is to ascertain whether trust is affected by contagion and herding in small groups of trustors who can observe each other’s choices over time. We account for three important factors of trustors’ preferences,namely: risk attitude, generosity and expected trustworthiness. Using our data we test the basic hypothesis that an individual's propensity to trust recipients in the Trust Game can be affected by the observed behavior of other trustors. Our results confirm that trust is affected by contagion effects. Furthermore, we find that specific types of agents (generous or untrusting) more often imitate the same type, when positioned in the same group. Finally, we find that untrusting individuals are less affected by their peers compared to generous individuals, and they imitate less even when positioned in groups of agents who have the same characteristics.
    Keywords: trust game, experiments, social influence, imitation
    JEL: C72 C91
    Date: 2011–11
  14. By: Iversen, Vegard Iversen (University of Manchester); Torsvik, Gaute (Department of Economics, University of Bergen)
    Abstract: Abstract: Workplace referrals may resolve incentive problems that arise due to incomplete contracts. We use an in-depth primary data set covering low- and unskilled migrants from Western Uttar Pradesh (India), to examine this and alternative explanations for referral-based recruitment. We find little evidence of referral screening for unobservable worker traits, but some support for a hypothesis of referral as a mechanism to enforce workforce discipline. Two observations back this conjecture: the high prevalence of strong kinship ties between referees and new recruits and that those who recruit are in more ‘prestigious’ jobs and therefore have higher stakes vis-à-vis their employer. These main findings are exposed to robustness checks to rule out rival explanations: that entry through a workplace insider merely reflects privileged access to job vacancy information; that workplace clustering results from preferences for working together or that the higher prevalence of referral for very young migrants that we observe may reflect that referral has an insurance dimension.
    Keywords: Work Migration; Social Networks; Screening; Moral Hazard
    JEL: J24 J61 R23 Z13
    Date: 2011–12–15
  15. By: Chris CM Forman; Nicolas van Zeebroeck
    Abstract: How did the diffusion of the Internet influence research collaborations within firms? We examine the relationship between business use of basic Internet technology and the size and geographic composition of industrial research teams between 1992 and 1998. We find robust empirical evidence that basic Internet adoption is associated with an increased likelihood of collaborative patents from geographically dispersed teams. On the contrary, we find no evidence of such a link between Internet adoption and within-location collaborative patents, nor do we find any evidence of a relationship between basic Internet and single-inventor patents. We interpret these results as evidence that adoption of basic Internet significantly reduced the coordination costs of research teams, but find little evidence that a drop in the costs of shared resource access significantly improved research productivity.
    Keywords: R&D organization, geography of innovation, internet adoption, IT
    JEL: O30 O32 L60
    Date: 2012
  16. By: Aslý Ertan (TEKPOL, Science and Technology Policy Studies, Middle East Technical University)
    Abstract: This paper investigates the effect of socioeconomic status, trust and privacy concerns, and socio psychological factors on building three structural measures of social capital, which are bridging, bonding and network size (degree). Using online survey data, I find the evidence that trust and privacy concerns, being a female, and the number of hours spent in Facebook are significant determinants of bridging social capital and degree. I show that females and respondents that have trust and privacy concerns are less likely to build bridging social capital. In addition to this, the number of hours spent on Facebook is positively related to the probability of engaging in bridging social capital. The results also suggest that females are less likely to increase their network size. On the other hand, respondents that spend more hours on Facebook and respondents that come from high-income class are more likely to increase their network size.
    Keywords: Social capital, Facebook, trust and privacy concern, socio-economic status, socio-psychological factors
    Date: 2011–08
  17. By: Fabrice Valognes (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen); Hélène Ferrer (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen); Guillermo Owen (Department of Applied Mathematics - Naval Postgraduate School)
    Abstract: The purpose of this paper is to examine the incentive of a player to join a syndicate in an environment of team production and payoff distribution according to Shapley value. We consider an economy in which a single output is produced by an increasing returns to scale production function using two inputs: labor and capital. By assuming that syndicates of factor owners can form, we are interested in their stability, i.e., the willingness of the members of the syndicate to stay in the syndicate. Our analysis, based on the Shapley value, allows us to find a fair imputation of the gains of cooperation and the conditions under which syndicates are stable.
    Keywords: Shapley Value; Syndicate; Coalition formation; Increasing return to scale.
    Date: 2011–12–15
  18. By: Kramarz, Francis (Center for Research in Economics and Statistics (CREST), CEPR, IZA, IFAU); Nordström Skans, Oskar (Uppsala Center for Labor Studies)
    Abstract: The conditions under which young workers find their first real post-graduation jobs are both very important for the young’s future careers and insufficiently known given their public policy implications. To study these conditions, and in particular the role played by networks, we use a Swedish population-wide linked employer-employee data set of graduates from all levels of schooling which includes detailed information on family ties, neighborhoods, schools, and class composition over a period covering high as well as low unemployment years. We find that strong social ties (parents) are an important determinant of where young workers find their first job. This remarkably robust effect is estimated controlling for all confounding factors related to time, location, education, occupation, and the interaction of these. The effect is larger if the graduate’s position is “weak” (low education) or during high unemployment years, a pattern which does not emerge when analyzing the role of weak ties (neighbors or friends as measured using classmates and their parents). On the hiring side, by contrast, the effects are larger if the parent’s position is “strong” (e.g. by tenure or wage). We find no evidence of substitution in recruitment over time and fields induced by “family ties hires”. However, we do find that, just after their child is hired in their plant, parents experience a sharp drop in their wage growth. Overall, our results show that strong (family) ties are more important in the job finding process of young workers in weak positions than those weak ties usually measured in the literature (neighbors, in particular), suggesting that labor market experience and education are essential conditions for weak ties to be strong.
    Keywords: Weak ties; social networks; youth employment
    JEL: J24 J62 J64
    Date: 2011–10–27

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