
on Network Economics 
By:  Peitz, Martin; Rady, Sven; Trepper, Piers 
Abstract:  We study optimal experimentation by a monopolistic platform in a twosided mar ket. The platform provider faces uncertainty about the strength of the externality each side is exerting on the other. It maximizes the expected present value of its profit stream in a continuoustime infinitehorizon framework by setting participation fees or quantities on both sides. We show that a pricesetting platform provider sets a fee lower than the myopically optimal level on at least one side of the market, and on both sides if the two sides are approximately symmetric. If the externality that one side exerts is sufficiently well known and weaker than the externality it experiences, the optimal fee on this side exceeds the myopically optimal level. We obtain analogous results for expected prices when the platform provider chooses quantities. While the optimal pol icy does not admit closedform representations in general, we identify special cases in which the undiscounted limit of the model can be solved in closed form. 
Keywords:  TwoSided Market , Network Effects , Monopoly Experimentation , Bayesian Learning , Optimal Control 
JEL:  D42 D83 L12 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:mnh:wpaper:32932&r=net 
By:  Mohamed Belhaj (Centrale Marseille, (AixMarseille School of Economics), CNRS and EHESS); Sebastian Bervoets (AixMarseille University (AixMarseille School of Economics), CNRS and EHESS); Frédéric Deroïan (AixMarseille University (AixMarseille School of Economics), CNRS and EHESS) 
Abstract:  We consider agents playing a linear network game with strategic complementarities. We analyse the problem of a policy maker who can change the structure of the network in order to increase the aggregate efforts of the individuals and/or the sum of their utilities, given that the number of links of the network has to remain fixed. We identify some link reallocations that guarantee an improvement of aggregate efforts and/or aggregate utilities. With this comparative statics exercise, we then prove that the networks maximising both aggregate outcomes (efforts and utilities) belong to the class of NestedSplit Graphs. 
Keywords:  Network, Linear Interaction, Bonacich Centralities, Strategic Complementarity, Nested Split Graphs. 
JEL:  C72 D85 
Date:  2013–02–12 
URL:  http://d.repec.org/n?u=RePEc:aim:wpaimx:1309&r=net 
By:  Antonio Cabrales; Piero Gottardo; Fernando VegaRedondo 
Abstract:  The aim of this paper is to investigate how the capacity of an economic system to absorb shocks depends on the specific pattern of interconnections established among financial firms. The key tradeoff at work is between the risksharing gains enjoyed by firms when they become more interconnected and the largescale costs resulting from an increased risk exposure. We focus on two dimensions of the network structure: the size of the (disjoint) components into which the network is divided, and the "relative density" of connections within each component. We find that when the distribution of the shocks displays "fat" tails extreme segmentation is optimal, while minimal segmentation and high density are optimal when the distribution exhibits "thin" tails. For other, less regular distributions intermediate degrees of segmentation and sparser connections are also optimal. We also find that there is typically a conflict between efficiency and pairwise stability, due to a "size externality" that is not internalized by firms who belong to components that have reached an individually optimal size. Finally, optimality requires perfect assortativity for firms in a component. 
Keywords:  Firm networks, Contagion, Risk Sharing 
JEL:  D85 C72 G21 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:eui:euiwps:eco2013/01&r=net 
By:  Muhamed Kudic; Katja Guhr 
Abstract:  We study how firm innovativeness is related to individual cooperation events and the structure and dynamics of firms’ egonetworks employing a unique panel dataset for the full population of 233 German laser source manufactures between 1990 and 2010. Firm innovativeness is measured by yearly patent applications as well as patent grants with a two year timelag. Network measures are calculated on the basis of 570 knowledgerelated publicly funded R&D alliances. Estimation results from a panel data count model with fixed effects are suggestive of direct innovation effects due to individual cooperation events, but only as long as structural egonetwork characteristics are neglected. Innovativeness is robustly related to egonetwork size and egonetwork brokerage whereas egonetwork density reveals some surprising results. 
Keywords:  R&D cooperation, egonetworks, firm innovativeness 
JEL:  L25 O32 D85 
Date:  2013–02 
URL:  http://d.repec.org/n?u=RePEc:iwh:dispap:613&r=net 
By:  Daniel Fricke; Karl Finger; Thomas Lux 
Abstract:  Networks constructed from credit relationships in the interbank market have been found to exhibit disassortative mixing together with a scalefree degree distribution, in contrast to most social networks that are assortative and not necessarily scalefree. This provokes the question whether generating mechanisms for scalefree networks have enough flexibility to generate both assortative and disassortative structures depending on their parametrization. Using MonteCarlo simulations, we show that scalefree networks with a small tail exponent tend to be disassortative. However, the simulations indicate also that the level of disassortativity is sensitive to changes in the scaling exponent and the density. A given combination of disassortativity, scaling of the degree distribution, and density in an empirical data set, might be hard or impossible to obtain from any of the known generating mechanisms for scalefree networks 
Keywords:  Interbank Market, Network Models, ScaleFree Networks, Powerlaw 
JEL:  G21 G01 E42 
Date:  2013–02 
URL:  http://d.repec.org/n?u=RePEc:kie:kieliw:1830&r=net 
By:  Sina Önder, Ali (Uppsala Center for Fiscal Studies); Terviö, Marko (Aalto University and HECER) 
Abstract:  We investigate divisions within the citation network in economics using citation data between 1990 and 2010. We consider all partitions of top institutions into two equalsized clusters, and pick the one that minimizes crosscluster citations. The strongest division is much stronger than could be expected to be found under idiosyncratic citation patterns, and is consistent with the reputed freshwater/saltwater division in macroeconomics. The division is stable over time, but varies across the fields of economics. 
Keywords:  citations; clustering; influence; schools of thought 
JEL:  A11 D85 I23 
Date:  2013–02–13 
URL:  http://d.repec.org/n?u=RePEc:hhs:uufswp:2013_003&r=net 