nep-net New Economics Papers
on Network Economics
Issue of 2013‒04‒13
twelve papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Dynamic Network Formation in Two-Sided Economies By Pongou, Roland; Serrano, Roberto
  2. Two-Way Street Networks: More Efficient than Previously Thought? By Gayah, Vikash V.
  3. Market Definition in Two-Sided Markets: Theory and Practice By Lapo Filistrucchi; Damien Geradin; Eric van Damme; Pauline Affeldt
  4. Systemic Risk, Contagion, and Financial Networks: A Survey By Matteo Chinazzi; Giorgio Fagiolo
  5. Confirming Information Flows in Networks By Billand, Pascal; Bravard, Christophe; Kamphorst, Jurjen J.A.; Sarangi, Sudipta
  6. Determinants of international technology transfer: an empirical analysis of the Enterprise Europe Network By Ana Carina Araújo; Aurora A.C. Teixeira
  7. Supply Chain Networks Promote the Resilience of Firms to Natural Disasters: Lessons from the Great East Japan Earthquake (Japanese) By TODO Yasuyuki; NAKAJIMA Kentaro; Petr MATOUS
  8. Fixed-Mobile Integration By Bourreau, Marc; Cambini, Carlo; Hoernig, Steffen
  9. Peer Effects: Social Multiplier or Social Norms? By Liu, Xiaodong; Patacchini, Eleonora; Zenou, Yves
  10. Jan Tinbergen's legacy for economic networks: from the gravity model to quantum statistics By Tiziano Squartini; Diego Garlaschelli
  11. Understanding Innovation in Production Networks in East Asia By Ganeshan Wignaraja
  12. Do large departments make academics more productive? Agglomeration and peer effects in research By Bosquet, Clément; Combes, Pierre-Philippe

  1. By: Pongou, Roland; Serrano, Roberto
    Abstract: We study the dynamic stability of networks in a two-sided economy of agents labelled men and women. Each agent desires relationships with the other type, but having multiple partners is costly. This cost-benefit trade-off results in each agent having a single-peaked utility function, the peak being greater for men than for women. We propose two stochastic Markov processes in which self-interested agents form and sever links over time, but may also take actions that do not increase their utility with small probability. In the first process, an agent who invests more time in a relationship signals commitment to his/her partner, whereas in the second, such an agent is perceived as having a weaker position. We prove that only egalitarian pairwise stable networks (in which all agents have the same number of partners) form in the long run under the first process, while under the second, only anti-egalitarian pairwise stable networks (in which all women are matched to a small number of men) arise. This latter outcome is also consistent with the presence of "herd externality" or "informational cascade", leading to a pattern of a one-sided thin market. Applying these results to communication shows that the diffusion of a given piece of information can widely vary across identical economies, and that information concentrates more in women than in men. The model sheds light on patterns of network formation in several two-sided markets, including employer-employee, dating, buyer-seller, and faculty-student relationships.
    Keywords: Two-sided networks, pairwise stability, stochastic stability, herd externality, informational cascade, contagion asymmetry, thin economy.
    JEL: A14 C7 I12 J00
    Date: 2013–04–09
  2. By: Gayah, Vikash V.
    Keywords: Engineering, Natural Resources and Conservation, Social Sciences, two-way streets, one-way streets, downtown, urban planners
    Date: 2012–10–01
  3. By: Lapo Filistrucchi (DISEI, Università degli studi di Firenze); Damien Geradin; Eric van Damme; Pauline Affeldt
    Abstract: Drawing from the economics of two-sided markets, we provide suggestions for the definition of the relevant market in cases involving two-sided platforms, such as media outlets, online intermediaries, payment cards companies and auction houses. We also discuss when a one-sided approach may be harmless and when instead it can potentially lead to a wrong decision. We then show that the current practice of market definition in two-sided markets is only in part consistent with the above suggestions. Divergence between our suggestions and practice is due to the failure to fully incorporate the lessons from the economic theory of two-sided markets, to the desire to be consistent with previous practice and to the higher data requirements and the higher complexity of empirical analysis in cases involving two-sided platforms. In particular, competition authorities have failed to recognize the crucial difference between two-sided transaction and non-transaction markets and have been misled by the traditional argument that where there is no price, there is no market.
    Keywords: two-sided markets, two-sided platforms, market definition, SSNIP test, Hypothetical Monopolist test
    JEL: L40 L50 K21
    Date: 2013
  4. By: Matteo Chinazzi; Giorgio Fagiolo
    Abstract: The recent crisis has highlighted the crucial role that existing linkages among banks and financial institutions plays in channeling and amplifying shocks hitting the system. The structure and evolution of such web of linkages can be fruitfully characterized using concepts borrowed from the theory of (complex) networks. This paper critically surveys recent theoretical work that exploits this concept to explain the sources of contagion and systemic risk in financial markets. We taxonomize existing contributions according to the impact of network connectivity, bank heterogeneity, existing uncertainty in financial markets, portfolio composition of the banks. We end with a discussion of the most important challenges faced by theoretical network-based models of systemic risk. These include a better understanding of the causal links between network structure and the likelihood of systemic risk and increasingly using the empirical knowledge about real-world financial-network structures to calibrate theoretical models.
    Keywords: Systemic Risk, Contagion, Complex Networks, Resilience, Connectivity, Robust-yet-Fragile Networks, Financial and Economic Crisis
    Date: 2013–04–04
  5. By: Billand, Pascal; Bravard, Christophe; Kamphorst, Jurjen J.A.; Sarangi, Sudipta
    Abstract: Social networks, be it on the internet or in real life, facilitate information flows. We model this by giving agents incentives to link with others and receive information through those links. We consider networks where agents have an incentive to confirm the information they receive from others. Our paper analyzes the social networks that are formed. We first study the existence of Nash equilibria and then characterize the set of strict Nash networks. Next, we characterize the set of strictly efficient networks and discuss the relationship between strictly efficient networks and strict Nash networks. Finally, we check the robustness of our results by allowing for heterogeneity among agents, possibility of bilateral deviations of agents, and decay in the network.
    Keywords: connections model, confirmation, two-way flow models.
    JEL: C72 D85
    Date: 2013–04
  6. By: Ana Carina Araújo (AdI – Portuguese Innovation Agency); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto; OBEGEF)
    Abstract: Given that science and technology are inductors of economic development, the emergence of a knowledge-based economy creates an overlay of communications and expectations that have led to institutional restructuring based on innovative capacities. While the literature tends to concentrate on university-industry relations, this paper intends go a step further, by exploring the university-industry-government relations established in a technology transfer context. Particular attention is paid to the key factors that foster technology transfer within the triad university-industry-government in an international context, i.e., the Enterprise Europe Network (EEN). Based on 71 technological Partnership Agreements (PAs), estimation results indicate that PAs associated to partners that provide their collaborators with the appropriate training in technology transfer-related issues, present substantial past experience in international or technological projects, and participate in extensive networks, are those that achieve better performances in terms of international technology transfer. In contrast, and quite surprisingly, the EEN’s human capital endowments and absorptive capacity act as barriers to international technology transfer. A deeper analysis into this latter finding shows that high levels of formal schooling per se are not a key determinant of international technology transfer; indeed, the critical factor is instead highly educated human resources who receive complementary training in technology transfer issues.
    Keywords: International technology transfer; Triple Helix; Enterprise Europe Network
    JEL: O32 O33 O38
    Date: 2013–01
  7. By: TODO Yasuyuki; NAKAJIMA Kentaro; Petr MATOUS
    Abstract: This paper examines how supply chain networks affected the resilience of firms to the Great East Japan Earthquake, particularly looking at the effects on the time period before resuming operations after the earthquake and sales growth from the pre- to the post-earthquake period. The results indicate that the expansion of supply chain networks has two opposing effects on the resilience of firms to disasters. On the one hand, when firms are connected with more firms through supply chain networks, they are more likely to experience disruptions in supply and demand, which delay recovery. On the other hand, firms can benefit from diversified networks with suppliers and clients because they can substitute the surviving firms in the network for the damaged partners and receive support from them. Our results indicate that the latter's positive effect on recovery exceeds the former's negative effect for many types of network, implying that diversified supply chain networks lead to the resilience of firms to natural disasters.
    Date: 2013–04
  8. By: Bourreau, Marc; Cambini, Carlo; Hoernig, Steffen
    Abstract: Often, fixed-line incumbents also own the largest mobile network. We consider the effect of this joint ownership on market outcomes. Our model predicts that while fixed-to-mobile call prices to the integrated mobile network are more efficient than under separation, those to rival mobile networks are distorted upwards, amplifying any incumbency advantage. As concerns potential remedies, a uniform off-net pricing constraint leads to higher welfare than functional separation and even allows to maintain some of the efficiency gains.
    Keywords: Call externality; Integration; Network competition; On/off-net pricing
    JEL: L51 L92
    Date: 2013–02
  9. By: Liu, Xiaodong; Patacchini, Eleonora; Zenou, Yves
    Abstract: We develop an unified model embedding different behavioral mechanisms of social interactions and design a statistical model selection test to discriminate between them in empirical applications. This framework is applied to study peer effects in education and delinquent behavior for adolescents in the United States. We find that there are strong social multiplier effects in crime while, for education, social norms matter the most. This suggests that, for crime, individual-based policies are more appropriate while, for education, group-based policies are more effective.
    Keywords: group-based policy.; individual-based policy; Social networks; spatial autoregressive model
    JEL: A14 D85 Z13
    Date: 2013–02
  10. By: Tiziano Squartini; Diego Garlaschelli
    Abstract: Jan Tinbergen, the first recipient of the Nobel Memorial Prize in Economics in 1969, obtained his PhD in physics at the University of Leiden under the supervision of Paul Ehrenfest in 1929. Among many achievements as an economist after his training as a physicist, Tinbergen proposed the so-called Gravity Model of international trade. The model predicts that the intensity of trade between two countries is described by a formula similar to Newton's law of gravitation, where mass is replaced by Gross Domestic Product. Since Tinbergen's proposal, the Gravity Model has become the standard model of non-zero trade flows in macroeconomics. However, its intrinsic limitation is the prediction of a completely connected network, which fails to explain the observed intricate topology of international trade. Recent network models overcome this limitation by describing the real network as a member of a maximum-entropy statistical ensemble. The resulting expressions are formally analogous to quantum statistics: the international trade network is found to closely follow the Fermi-Dirac statistics in its purely binary topology, and the recently proposed mixed Bose-Fermi statistics in its full (binary plus weighted) structure. This seemingly esoteric result is actually a simple effect of the heterogeneity of world countries, that imposes strong structural constraints on the network. Our discussion highlights similarities and differences between macroeconomics and statistical-physics approaches to economic networks.
    Date: 2013–04
  11. By: Ganeshan Wignaraja (Asian Development Bank Institute (ADBI))
    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: innovation, Production Networks, East Asia, technology index, Technological Capability, Foreign Ownership, Thailand, PRC, Philippines
    JEL: F23 O31 O32 L63 O57
    Date: 2013–03
  12. By: Bosquet, Clément; Combes, Pierre-Philippe
    Abstract: We study the effect of a large set of department characteristics on individual publication records. We control for many individual time-varying characteristics, individual fixed-effects and reverse causality. Department characteristics have an explanatory power that can be as high as that of individual characteristics. The departments that generate most externalities are those where academics are homogeneous in terms of publication performance and have diverse research fields, and, to a lesser extent, large departments, with more women, older academics, star academics and foreign co-authors. Department specialisation in a field also favours publication in that field. More students per academic does not penalise publication. At the individual level, women and older academics publish less, while the average publication quality increases with average number of authors per paper, individual field diversity, number of published papers and foreign co-authors.
    Keywords: economic geography; economics of science; networks; productivity determinants; selection and endogeneity
    JEL: I3 J24 R12
    Date: 2013–03

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