|
on Network Economics |
| By: | Salem, Sherif Gamal |
| Abstract: | we propose a fairness property called P-monotonicity that we would like a matching mechanism to satisfy. We show that it is impossible to have a mechanism which is both stable and P- monotonic. Moreover, we show that it is impossible to have a mechanism which is both efficient and P-monotonic. |
| Keywords: | Stability; Efficiency; Monotonicity; Two-Sided Matching |
| JEL: | C78 |
| Date: | 2012–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37215&r=net |
| By: | Garratt, Rodney; Mahadeva, Lavan; Svirydzenka, Katsiaryna |
| Abstract: | Systemic risk among the network of international banking groups arises when financial stress threatens to crisscross many national boundaries and expose imperfect international coordination. To assess this risk, we use Rosvall and Bergstrom’s (PNAS, 2008, 1118-1123) information theoretic map equation to partition banking groups from 21 countries into modules. We consider a quarter of a century of data on the cross-border interbank market. We show that in the late 1980s four important financial centres formed one large super cluster that was highly contagious in terms of transmission of stress within its ranks, but less contagious on a global scale. But the expansion leading to the 2008 crisis left more transmitting hubs sharing the same total influence as a few large modules had previously. We show that this greater entanglement meant the network was more broadly contagious, and not that risk was more shared. Thus, our analysis contributes to our understanding as to why defaults in US sub-prime mortgages spread quickly through the network. |
| Keywords: | International Economics, Economics, General, Contagion, Finance, Networks |
| Date: | 2011–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:qt0r89f16p&r=net |
| By: | Demange, Gabrielle |
| Abstract: | An intricate web of claims and obligations ties together the balance sheets of a wide variety of financial institutions. Under the occurrence of default, these interbank claims generate externalities across institutions and possibly disseminate defaults and bankruptcy. Building on a simple model for the joint determination of the repayments of interbank claims, this paper introduces a measure of the threat that a bank poses to the system. Such a measure, called threat index, may be helpful to determine how to inject cash into banks so as to increase debt reimbursement, or to assess the contributions of individual institutions to the risk in the system. Although the threat index and the default level of a bank both reflect some form of weakness and are affected by the whole liability network, the two indicators differ. As a result, injecting cash into the banks with the largest default level may not be optimal. |
| Keywords: | bankruptcy; contagion; Contagion in financial networks : a threat index; financial linkages; systemic risk |
| JEL: | G01 G21 G28 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8793&r=net |
| By: | Carrillo, Juan D; Gaduh, Arya |
| Abstract: | We use a laboratory experiment to explore dynamic network formation in a six-player game where link creation requires mutual consent. The analysis of network outcomes suggests that the process tends to converge to the pairwise-stable (PWS) equilibrium when it exists and not to converge at all when it does not. When multiple PWS equilibria exist, subjects tend to coordinate on the high-payoff one. The analysis at the single choice level indicates that the percentage of myopically rational behavior is generally high. Deviations are more prevalent when actions are reversible, when marginal payoff losses are smaller and when deviations involve excessive links that can be removed unilaterally later on. There is, however, some heterogeneity across subjects. |
| Keywords: | Laboratory experiments; Myopic rationality; Pairwise stable equilibria; Social networks |
| JEL: | C73 C92 D85 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8757&r=net |
| By: | Banerjee, Abhijit; Chandrasekhar, Arun G; Duflo, Esther; Jackson, Matthew O. |
| Abstract: | We examine how participation in a microfinance program diffuses through social networks. We collected detailed demographic and social network data in 43 villages in South India before microfinance was introduced in those villages and then tracked eventual participation. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, "the injection points". Microfinance participation is higher when the injection points have higher eigenvector centrality. We estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and non-participants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants, but that information passing by non-participants is still substantial and significant, accounting for roughly a third of informedness and participation. We also find that, conditioned on being informed, an individual's decision is not significantly affected by the participation of her acquaintances. |
| Keywords: | diffusion; microfinance; peer effects; social networks |
| JEL: | D13 D85 G21 L14 O12 O16 Z13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8770&r=net |
| By: | Fershtman, Chaim; Gandal, Neil |
| Abstract: | Cloud computing is defined to be Internet based computing technology, where the term 'cloud' simply means Internet -- and cloud computing refers to services that are accessed directly over the Internet. There are essentially three categories of cloud computing. (i) Iaas (Infrastructure as a Service) -- number crunching, data storage and management services (computer servers), (ii), SaaS (Software as a Service) -- ‘web based’ applications, and (iii) PaaS (Platform as a Service) -- essentially an operating system in the cloud. Much of the attention and literature has focused on the revolution in Iaas services provided via the cloud. Despite the major changes in technology in IaaS services, estimates indicate that more than 90% of the cloud computing market (in terms of revenues) will involve (virtual) operating systems and applications software services (i.e., PaaS and SaaS services.) In this paper, we examine how several key economic factors will likely affect competition in SaaS/PaaS services in the cloud. |
| Keywords: | cloud computing; network effects; platform competition; two-sided markets |
| JEL: | L13 L86 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8907&r=net |
| By: | Lee, Lung-Fei; Liu, Xiaodong; Patacchini, Eleonora; Zenou, Yves |
| Abstract: | We analyze delinquent networks of adolescents in the United States. We develop a dynamic network formation model showing who the key player is, i.e. the criminal who once removed generates the highest possible reduction in aggregate crime level. We then structurally estimate our model using data on criminal behaviors of adolescents in the United States (AddHealth data). Compared to other criminals, key players are more likely to be a male, have less educated parents, are less attached to religion and feel socially more excluded. We also find that, even though some criminals are not very active in criminal activities, they can be key players because they have a crucial position in the network in terms of betweenness centrality. |
| Keywords: | Bonacich centrality; crime policies; dynamic network formation |
| JEL: | A14 D85 K42 Z13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8772&r=net |
| By: | König, Michael; Tessone, Claudio J.; Zenou, Yves |
| Abstract: | We develop a dynamic network formation model that can explain the observed nestedness in real-world networks. Links are formed on the basis of agents’ centrality and have an exponentially distributed life time. We use stochastic stability to identify the networks to which the network formation process converges and find that they are nested split graphs. We completely determine the topological properties of the stochastically stable networks and show that they match features exhibited by real-world networks. Using four different network datasets, we empirically test our model and show that it fits well the observed networks. |
| Keywords: | Bonacich centrality; nested split graphs; nestedness; network formation |
| JEL: | A14 C63 D85 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8807&r=net |
| By: | Constantine Manasakis (Department of Economics, University of Crete, Greece); Dusanee Kesavayuth (Research Institute for Policy Evaluation and Design, University of the Thai Chamber of Commerce, 126/1 Vibhavadee-Rangsit Road, Dindaeng, Bangkok, 104); Vasileios Zikos (School of Economics, University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom; and Research Institute for Policy Evaluation and Design, Univer) |
| Abstract: | We study the endogenous formation of upstream R&D networks in a vertically related industry. We find that, when upstream firms set prices, the complete network that includes all firms emerges in equilibrium. In contrast, when upstream firms set quantities, the complete network will arise but only if within-network R&D spillovers are sufficiently low, while if R&D spillovers are sufficiently high, a partial network arises. Interestingly, when upstream firms set prices, the equilibrium network maximizes social welfare, while a conflict between equilibrium and socially optimal networks is likely to occur when upstream firms set quantities. |
| Keywords: | Networks, R&D collaboration, upstream firms. |
| JEL: | L13 J50 |
| Date: | 2012–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:crt:wpaper:1201&r=net |
| By: | Dessí, Roberta; Gallo, Edoardo; Goyal, Sanjeev |
| Abstract: | We study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit two main cognitive biases: (i) they underestimate the mean degree compared to the actual network and (ii) they underestimate (overestimate) the number of frequent (rare) degrees. We then analyze survey data from two `real' friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases. The experiments yield three further findings: (iii) network cognition is affected by the subject's location, (iv) the accuracy of network cognition varies with the nature of the network, and (v) limitations in network cognition have payoff implications. |
| Keywords: | cognition; social networks |
| JEL: | Z1 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8732&r=net |
| By: | Ruben Juarez (Department of Economics, University of Hawaii at Manoa); Rajnish Kumar (Department of Economics, Louisiana State University) |
| Abstract: | We consider the problem of sharing the cost of a network that meets the connection demands of a set of agents. The agents simultaneously choose paths in the network connecting their demand nodes. A mechanism splits the total cost of the network formed among the participants. We introduce two new properties of implementation. The first property, Pareto Nash Implementation (PNI), requires that the ecient outcome always be implemented in a Nash equilibrium and that the efficient outcome Pareto dominates any other Nash equilibrium. The average cost mechanism (AC) and other asymmetric variations are the only rules that meet PNI. These mechanisms are also characterized under Strong Nash Implementation. The second property, Weakly Pareto Nash Implementation (WPNI), requires that the least inefficient equilibrium Pareto dominates any other equilibrium. The egalitarian mechanism (EG), a variation of AC that meets individual rationality, and other asymmetric mechanisms are the only rules that meet WPNI and Individual Rationality. PNI and WPNI provide the first economic justification of the Price of Stability (PoS), a seemingly natural measure in the computer science literature but one not easily embraced in economics. EG minimizes the PoS across all individually rational mechanisms. |
| Keywords: | Cost-sharing, Implementation, Average Cost, Egalitarian Mechanism |
| JEL: | C70 C72 D71 D85 |
| Date: | 2012–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201203&r=net |
| By: | Ligon, Ethan; Schechter, Laura |
| Abstract: | What motivates people in rural villages to share? We first elicit a baseline level of sharing using a standard, anonymous dictator game. Then using variants of the dictator game that allow for either revealing the dictator's identity or allowing the dictator to choose the recipient, we attribute variationin sharing to three different motives. The first of these, directed altruism, is related to preferences, while the remaining two are incentive-related(sanctions and reciprocity). We observe high average levels of sharing in ourbaseline treatment, while variation across individuals depends importantlyon the incentive-related motives. Finally, variation in measured reciprocity within the experiment predicts observed 'real-world' gift-giving, while other motives measured in the experiment do not predict behavior outside the experiment. |
| Keywords: | Social Sciences, General, Economics |
| Date: | 2011–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:agrebk:qt4sn304b6&r=net |
| By: | Garance Genicot, Orazio Attanasio, Abigail Barr, Juan Camilo Cardenas and Costas Meghir (Department of Economics, Georgetown University) |
| Abstract: | Using data from an experiment conducted in 70 Colombian communities, we investigate who pools risk with whom when trust is crucial to enforce risk pooling arrangements. We explore the roles played by risk attitudes and social networks. Both theoretically and empirically, we nd that close friends and relatives group assortatively on risk attitudes and are more likely to join the same risk pooling group, while unfamiliar participants group less and rarely assort. These ndings indicate that where there are advantages to grouping assortatively on risk attitudes those advantages may be inaccessible when trust is absent or low. |
| Keywords: | Field experiment; risk sharing; social sanctions; insurance; group formation; matching. |
| Date: | 2011–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~11-11-05&r=net |