|
on Network Economics |
| By: | Grzegorz Hałaj (European Central Bank); Christoffer Kok Sørensen (European Central Bank) |
| Abstract: | This paper presents a new approach to randomly generate interbank networks while overcoming shortcomings in the availability of bank-by-bank bilateral exposures. Our model can be used to simulate and assess interbankcontagion effects on banking sector soundness and resilience. We find a strongly non-linear pattern across the distribution of simulated networks, whereby only for a small percentage of networks the impact of interbank contagion will substantially reduce average solvency of the system. In the vast majority of the simulated networks the system-wide contagion effects are largely negligible. The approach furthermore enables to form a view aboutthe most systemic banks in the system in terms of the banks whose failure would have the most detrimental contagion effects on the system as a whole. Finally, as the simulation of the network structures is computationally verycostly, we also propose a simplified measure - a so-called Systemic Probability Index (SPI) - that also captures the likelihood of contagion from the failure of a given bank to honour its interbank payment obligations but at the same time is less costly to compute. We find that the SPI is broadly consistent with the results from the simulated network structures. |
| Keywords: | Network theory; interbank contagion; systemic risk; banking; stress-testing |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20131506&r=net |
| By: | Mohamed Belhaj (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM)); Sebastian Bervoets (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM)); Frédéric Deroïan (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM)) |
| 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 Nested-Split Graphs. |
| Keywords: | Network; Linear Interaction; Bonacich Centralities; Strategic Complementarity; Nested Split Graphs |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00796487&r=net |
| By: | Vincent van den Berg (VU University Amsterdam) |
| Abstract: | Consider a government tendering the right to operate, for example, an airport, telecommunication network, or utility. There is an 'incumbent bidder' who owns a complement or substitute facility, and one entering 'new bidder'. With a 'standard auction' on the payment to the government, the incumbent is willing to bid higher than its expected profit from the facility as winning implies that it is a monopolist instead of a duopolist. The incumbent is therefore more likely to win. However, it tends to have a lower expected surplus unless the new bidder can never win, which occurs with 'private values' when the facilities are strong complements or substitutes and always with 'common values'. The 'standard auction' leads to an unregulated outcome which hurts consumers as tendered facilities tend to have limited competition. The government could improve the outcome by endogenously regulating using a 'price auction' on the price to be a sked to consumers. Now, it depends who is advantaged: with complements, the incumbent bids below its marginal cost and is more likely to win; with substitutes, it bids above and is less likely to win. The same effects occur in auctions on service quality or number of users. In many settings, the advantaged bidder always wins, and this can greatly affect the competition for the field. |
| Keywords: | tendering; overbidding; advantaged bidders; network markets |
| JEL: | D43 D44 L51 R42 |
| Date: | 2013–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20130033&r=net |
| By: | Takuya Masuzawa (Faculty of Economics, Keio University) |
| Abstract: | Metzler functions arise in various kinds of system optimization problems such as the stable matching of two-sided markets and the α-cores of games with punishment-dominance relations. In this paper, we discuss the shortest-path problem as an application of the theory of Metzler functions. We derive the Moore-Bellman-Ford algorithm for the shortest-path problem. |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:kei:dpaper:2012-030&r=net |
| By: | Wignaraja, Ganeshan (Asian Development Bank Institute) |
| Abstract: | This paper explores the “black box” of innovation in the electronics production network in East Asia through a mapping exercise of technological capabilities and an econometric analysis of exporting in the People’s Republic of China (PRC), Thailand, and the Philippines. Technology-based approaches to trade offer a plausible explanation for firm-level exporting behavior and complement the literature on production networks. The econometric results confirm the importance of foreign ownership and innovation in increasing the probability of exporting in electronics. Higher levels of skills, managers’ education, and capital also matter in the PRC as well as accumulated experience in Thailand. Furthermore, a technology index composed of technical functions performed by firms (to represent technological capabilities) emerges as a more robust indicator of innovation than the research and development (R&D) to sales ratio. Accordingly, technological effort in electronics in these countries mostly focuses on assimilating and using imported technologies rather than formal R&D by specialized engineers. |
| Keywords: | production networks; foreign direct investment; innovation; technological capabilities; r&d; exports; east asia; prc; thailand; philippines |
| JEL: | F23 L63 O31 O32 O57 |
| Date: | 2013–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0410&r=net |
| By: | David Pérez-Castrillo; Marilda Sotomayor |
| Abstract: | We prove a "General Manipulability Theorem" for general one-to-one two-sided matching markets with money. This theorem implies two folk theorems, the Manipulability Theorem and the General Impossibility Theorem, and provides a sort of converse of the Non-Manipulability Theorem (Demange, 1982, Leonard, 1983, Demange and Gale, 1985). |
| Keywords: | matching, competitive equilibrium, optimal competitive equilibrium, manipulability, competitive equilibrium mechanism, competitive equilibrium rule |
| JEL: | C78 D78 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:681&r=net |