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on Network Economics |
| By: | Britta Hoyer |
| Abstract: | "The enemy of my enemy is my friend." This common adage, which seems to be adhered to in social interactions (e.g. high school cliques or work relationships) as well as in political alliances within countries and between countries, describes the ability of groups or people to work together when they face an opponent, although otherwise they have little in common. In social psychology this phenomenon has been termed the "common enemy effect". Such group behavior can be studied using networks to depict the players within a group and the relationships between them. In this paper we study the effect of a common enemy on a model of network formation, where self-interested, myopic players can use links to build a network, knowing that they are facing a common enemy who can disrupt the links within the network and whose goal it is to minimize the overall value of the network. We find that introducing such a common enemy can lead to the formation of stable and efficient networks which would not be stable without the threat of disruption. However, we also find that fragmented networks as well as the empty networks are also stable. While the common enemy can thus have a positive effect on the incentives of players to form an efficient network, it can also lead to fragmentation and disintegration of the network. |
| Keywords: | strategic network disruption, strategic network design, non-cooperative network games |
| JEL: | C72 D85 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:1206&r=net |
| By: | Igor Tsatskis (Financial Services Authority, London) |
| Abstract: | A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing individual banks; associated with each node is a balance sheet consisting of assets and liabilities. Initial node failures are triggered by external correlated shocks applied to the asset sides of the balance sheets. These defaults lead to further reductions in asset values of all nodes which in turn produce additional failures, and so on. This mechanism induces indirect interactions between the nodes and leads to a cascade of defaults. There are no interbank links, and therefore no direct interactions, between the nodes. The resulting probability distribution for the total (direct plus systemic) network loss can be viewed as a modification of the well-known Vasicek distribution. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1203.6778&r=net |
| By: | Mizuno, Junko |
| Abstract: | When Vietnam joined the WTO, it accepted foreign direct investment and started to grow. Technically, it was then greatly influenced by the enterprises that entered the country through direct investment. This report shows that the technology network for machine tools is formed via direct investment and subcontracting. |
| Keywords: | Vietnam, Manufacturing industries, Machinery, Imports, Technology Network, Machine Tools, International Division of Labor |
| JEL: | L64 M31 O14 O32 O33 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper336&r=net |
| By: | Daniel Fricke |
| Abstract: | We analyze the correlations in patterns of trading for members of the Italian interbank trading platform e-MID. The trading strategy of a particular member institution is defined as the sequence of (intra-) daily net trading volumes within a certain semester. Based on this definition, we show that there are significant and persistent bilateral correlations between institutions' trading strategies. In most semesters we find two clusters, with positive correlations within the clusters and negative correlations between them. We show that the two clusters mostly contain continuous net buyers and net sellers of money, respectively, and that cluster memberships of individual banks are highly persistent. Additionally, we highlight some problems related to our definition of trading strategies. Our findings add further evidence on the fact that preferential lending relationships on the micro-level lead to community structure on the macro-level |
| Keywords: | interbank market, socio-economic networks, community identification |
| JEL: | G21 E42 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1766&r=net |
| By: | Okazaki, Tetsuji; Sawada, Michiru |
| Abstract: | In this paper, we explore the structure and implications of interbank networks in prewar Japan, focusing on director interlocking. We find that approximately half the banks had at least one connection with another bank through director interlocking, and that a bank that had connections with other banks was less likely to fail than a bank without a network. The quality of networks also matters in the sense that the failure probability of a bank with a network was negatively associated with the profitability of the connected banks. On the other hand, there is no strong evidence of financial contagion through networks. In addition, networks of director interlocking contributed to the stabilization of the financial system through coordinating bank mergers. |
| Keywords: | Networks, Banks, Director Interlocking, Mergers, Japan |
| JEL: | G21 G34 L14 L22 N25 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:hit:primdp:21&r=net |
| By: | Tsakas, Nikolas |
| Abstract: | This paper considers a model of observational learning in social networks. Every period, the agents observe the actions of their neighbors and their realized outcomes, and they imitate the most successful. First, we study the case where the network has finite population and we show that, regardless of the structure, the population converges to a monomorphic steady state, i.e. where every agent chooses the same action. Subsequently, we extend our analysis to infinitely large networks and we differentiate the cases where agents have bounded neighborhoods, with those where they do not. Under bounded neighborhoods, an action is diffused to the whole population if it is the only one initially chosen by infinitely many agents. If there exist more than one such actions, we provide an additional sufficient condition in the payoff structure, which ensures convergence for any network. Without the assumption of bounded neighborhoods, we show that an action can survive even if it is initially chosen by a single agent and also that a network can be in steady state without this being monomorphic. |
| Keywords: | Social Networks; Learning; Diffusion; Imitation |
| JEL: | D03 D83 D85 |
| Date: | 2012–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37796&r=net |
| By: | Ramon Flores (Universidad Carlos III de Madrid); Maurice Koster (University of Amsterdam); Ines Lindner (VU University Amsterdam); Elisenda Molina (Universidad Carlos III de Madrid) |
| Abstract: | This paper proposes a new measure for a group's ability to lead society to adopt their standard of behavior, which in particular takes account of the time the group takes to convince the whole society to adopt their position. This notion of a group's power to initiate action is computed as the reciprocal of the resistance against it, which is in turn given by the expected absorption time of a related finite state partial Markov chain that captures the social dynamics. The measure is applicable and meaningful in a variety of models where interaction between agents is formalized through (weighted) binary relations. Using Percolation Theory, it is shown that the group power is monotonic as a function of groups of agents. We also explain the differences between our measure and those discussed in the literature on Graph Theory, and illustrate all these concerns by a thorough analysis of two particular cases: the Wolfe Primate Data and the 11S hijackers' network. |
| Keywords: | Collective action; Social networks; Influence and diffusion models; Network intervention; Group centrality measures |
| JEL: | C79 D01 D71 |
| Date: | 2012–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20120032&r=net |
| By: | Stühmeier, Torben |
| Abstract: | This model discusses mobile network operators' (MNOs) incentives to invest in their network facilities such as new 4G networks under various regimes of data roaming charge regulation. Given an induced externality of investments (spillovers) due to the roaming agreements it will be shown that MNOs, competing on investments, widely set higher investments for below cost regulation of roaming charges. Otherwise, if MNOs are free to collaborate on investments, they set higher investment levels for above cost roaming charges. Both below- and above cost charges may be preferred from a welfare perspective. Furthermore, the paper discusses e ects of the roaming charge regulation on roaming quality and MNOs' coverage. -- |
| Keywords: | mobile Internet,investment spillover,national roaming,regulation |
| JEL: | L22 L51 L96 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:46&r=net |
| By: | Hennessy, David A. |
| Abstract: | Protection against pest invasion is a public good. Yet the nature of private incentives to avoid entry is poorly understood. This work shows that, due to increasing returns or network effects, private actions to avoid entry are strategic complements. This means that compulsory action, at least by a subset of parties, can be an effective policy. Both heterogeneity in biosecurity costs and the effect of private actions on the extent of the invasion threat are shown to have ambiguous effects on the magnitude of welfare loss due to strategic behavior. Communicated leadership by some party is preferred to simultaneous moves, and it may be best if the party with highest biosecurity costs assumes a leadership role. |
| Keywords: | communication; complementarity; increasing returns; infectious disease; invasive species; network economics; public good |
| JEL: | D6 H4 Q2 |
| Date: | 2012–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:35016&r=net |