nep-net New Economics Papers
on Network Economics
Issue of 2013‒08‒23
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Identification and Estimation in Two-Sided Matching Markets By Nikhil Agarwal; William Diamond
  2. Macro-networks: an application to the euro area financial accounts By Castrén, Olli; Rancan, Michela
  3. Attack, Defense and Contagion in Networks By S. Goyal; A. Vigier
  4. A flow network analysis of direct balance-sheet contagion in financial networks By Mario Eboli
  5. Do the rich get richer? An empirical analysis of the BitCoin transaction network By D\'aniel Kondor; M\'aton P\'osfai; Istv\'an Csabai; G\'abor Vattay
  6. File-Sharing and Film Revenues: An Empirical Analysis By McKenzie, Jordi; Walls, W. D.

  1. By: Nikhil Agarwal (Dept. of Economics, MIT); William Diamond (Dept. of Economics, Harvard University)
    Abstract: We study estimation and non-parametric identification of preferences in two-sided matching markets using data from a single market with many agents. We consider a model in which preferences of each side of the market is homogeneous, utility is non- transferable utility and the observed matches are pairwise stable. We show that preferences are not identified with data on one-to-one matches but are non-parametrically identified when data from many-to-one matches are observed. This difference in the identifiability of the model is illustrated by comparing two simulated objective functions, one that does and the other that does not use information available in many-to-one matching. We also prove consistency of a method of moments estimator for a parametric model under a data generating process in which the size of the matching market increases, but data only on one market is observed. Since matches in a single market are interdependent, our proof of consistency cannot rely on observations of independent matches. Finally, we present Monte Carlo studies of a simulation based estimator.
    Keywords: Two-sided matching, Identification, Estimation
    JEL: C13 C14 C78
    Date: 2013–08
  2. By: Castrén, Olli; Rancan, Michela
    Abstract: We use financial accounts data at sector level to construct financial networks for individual euro area countries. We then connect the country-level networks to one large “Macro Network”, using information on cross-border linkages between the national banking sectors. We then evaluate the features of the resulting framework using various network statistics. Shock simulations reveal that the structural features of the bilateral linkages are a key determinant of the losses that may be generated when the shocks propagate in the system. The network structures evolve over time, showing increasing interconnectedness in different instrument categories before the financial crisis hit in 2007, and a sharp retrenchment from bilateral exposures after the crisis started. This reflects the surge in counterparty risk and the de-leveraging processes which were triggered by the initial asset price losses and were further amplified by the economic downturn. As a consequence, there was a marked deterioration in financial integration both within economies and across countries in the euro area. Nonetheless, our analysis suggests that the risk of contagion is not reduced, while a more diversified portfolio of cross-border exposures might mitigate shocks effects. JEL Classification: E44, F36, G01, G15, G21
    Keywords: Balance sheet contagion, cross-border exposures, Financial crises, Financial networks, interconnectedness
    Date: 2013–02
  3. By: S. Goyal; A. Vigier
    Abstract: Connections between individuals facilitate the exchange of goods, resources and information and create benefits. These connections may be exploited by adversaries to spread their attacks as well. What is the optimal way to design and defend networks in the face of attacks? We develop a model with a Designer and an Adversary. The Designer moves first and chooses a network and an allocation of defense resources across nodes. The Adversary then allocates attack resources on nodes and determines how successful attacks should navigate the network. Our main result is that, in a wide variety of circumstances, a star network with all defense resources allocated to the central hub node is optimal for the Designer. The Adversary targets undefended peripheral nodes; upon capture of these nodes the resources mount a concerted attack on the center.
    Keywords: Networks, computer security, Tullock contests, connectivity
    Date: 2013–08–15
  4. By: Mario Eboli
    Abstract: This paper puts forward a novel approach to the analysis of direct contagion in financial networks. Financial systems are here represented as flow networks -i.e., directed and weighted graphs endowed with source nodes and sink nodes – and the propagation of losses and defaults, originated by an exogenous shock, is here represented as a flow that crosses such a network. In establishing existence and uniqueness of such a flow function, we address a know problem of indeterminacy that arise, in financial networks, from the intercyclicity of payments. Sufficient and necessary conditions for uniqueness are pinned down. We embed this result in an algorithm that, while computing the propagation caused by a shock, controls for the emergence of possible indeterminacies. We then apply some properties of network flows to investigate the relation between the structures of a financial network-i.e. the size and the pattern of obligations - and its exposure to default contagion
    Keywords: systemic risk, financial contagion, financial networks, flow networks
    JEL: C63 G01 G33
    Date: 2013–08
  5. By: D\'aniel Kondor; M\'aton P\'osfai; Istv\'an Csabai; G\'abor Vattay
    Abstract: The possibility to analyze everyday monetary transactions is limited by the scarcity of available data, as this kind of information is usually considered highly sensitive. Present econophysics models are usually employed on presumed random networks of interacting agents, and only macroscopic properties (e.g. the resulting wealth distribution) are compared to real-world data. In this paper, we analyze BitCoin, which is a novel digital currency system, where the complete list of transactions is publicly available. Using this dataset, we reconstruct the network of transactions, and extract the time and amount of each payment. We analyze the structure of the transaction network by measuring network characteristics over time, such as the degree distribution, degree correlations and clustering. We find that linear preferential attachment drives the growth of the network. We also study the dynamics taking place on the transaction network, i.e. the flow of money. We measure temporal patterns and the wealth accumulation. Investigating the microscopic statistics of money movement, we find that sublinear preferential attachment governs the evolution of the wealth distribution. We report a scaling relation between the degree and wealth associated to individual nodes.
    Date: 2013–08
  6. By: McKenzie, Jordi; Walls, W. D.
    Abstract: This study examines the impact of peer-to-peer (P2P) file-sharing on the Australian theatrical film industry. Using a large data set of torrent downloads observed on three popular P2P networks, we find evidence of a sales displacement effect on box office revenues. However, although statistically significant, the economic significance of this displacement appears relatively small. To establish causality, we make use of two precedent-setting Australian Federal Court case rulings, as well as observed levels of contemporaneous downloading in geographically separated markets within Australia. We observe that the release gap between the US and Australian markets is a key contributor to piracy early in a film's theatrical life; this finding provides a partial explanation for the industry's move toward coordinated worldwide rele ases.
    Date: 2013–07

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