nep-net New Economics Papers
on Network Economics
Issue of 2013‒09‒28
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Allocation rules for coalitional network games By CAULIER, Jean-François; MAULEON, Ana; VANNETELBOSCH, Vincent
  2. Credit Contagion in Financial Markets: A Network-Based Approach By Steinbacher, Matjaz; Steinbacher, Mitja; Steinbacher, Matej
  3. Role of Hub Firms in Geographical Transaction Network By SAITO Yukiko
  4. Strategic Search Diversion, Product Affiliation and Platform Competition By Hagiu, Andrei; Jullien, Bruno

  1. By: CAULIER, Jean-François (CES, Université Paris 1 Panthéon-Sorbonne, F-75647 Paris, France); MAULEON, Ana (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium); VANNETELBOSCH, Vincent (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium)
    Abstract: Coalitional network games are real-valued functions defined on a set of players organized into a network and a coalition structure. We adopt a flexible approach assuming that players organize themselves the best way possible by forming the efficient coalitional network structure. We propose two allocation rules that distribute the value of the efficient coalitional network structure: the atom-based flexible coalitional network allocation rule and the player-based flexible coalitional network allocation rule.
    Keywords: networks, coalition structures, allocation rules
    JEL: A14 C71 D85
    Date: 2013–07–09
  2. By: Steinbacher, Matjaz; Steinbacher, Mitja; Steinbacher, Matej
    Abstract: We propose a network-based model of credit contagion and examine the e�ects of idiosyncratic and systemic shocks to individual banks and the banking system. The banking system is built as a network in which banks are connected to each other through the interbank market. The microstructure captures the relation between debtors and creditors, and the macroeconomic events capture the sensitivity of the banks' �nancial strenght to macroeconomic events, such as housing. We have demonstrated that while idiosyncratic shocks do not have a potential to substantially disturb the banking system, macroeconomic events of higher magnitudes could be highly harmful, especially if they also spur contagion. In a concerted default of more banks, the stability of a banking system tends to decrease disproportionately. In addition, credit risk analysis is highly sensitive to the network topology and exhibits a nonlinear characteristic. Capital ratio and recovery rates are two additional factors that contribute to the stability of the �nancial system.
    Keywords: credit contagion; network models; credit risk; structural models; fi�nancial stability; alpha-criticality index
    JEL: C63 G01
    Date: 2013
  3. By: SAITO Yukiko
    Abstract: In this study, we investigate the role of geographical proximity in an inter-firm transaction network and the role of hub firms on geographical spread of regional impact. By using inter-firm micro transaction data of over 800 thousands firms, we found that indirect transaction is geographically dispersed mainly due to a few hub firms, although firm's direct transactions mostly occur within geographically narrow areas. More precisely, median distance between indirect transaction partners (partners' partners) is 255km, which is much larger than that between direct transaction partners (29km). In a counterfactual transaction network without hub firms, whose transaction relations are no less than 100, median distance between indirect transaction partners is reduced to 70km, thereby suggesting the important role of hub firms in a geographical transaction network. We confirm this suggestion through an analysis of regional impact of the Great East Japan Earthquake.
    Date: 2013–09
  4. By: Hagiu, Andrei; Jullien, Bruno
    Abstract: Platforms use search diversion in order to trade off total consumer traffic for higher revenues derived by exposing consumers to products other than the ones that best fit their preferences. Our analysis yields three key and novel insights regarding search diversion incentives, which have direct implications for platforms’ strategies and empirical predictions. First, platforms that charge positive access fees to consumers have weaker incentives to divert search relative to platforms that cannot (or choose not to) charge such fees. Second, endogenizing the affiliation of products that consumers are not interested in (advertising) leads to stronger incentives to divert search relative to the exogenous affiliation (vertical integration) benchmark, whenever the marginal product yields higher profits per consumer exposure relative to the average product. Third, the effect of platform competition on search diversion incentives depends on the nature of competition. Competition for advertising leads to more search diversion relative to competition for consumers. Both types of competition lead to at least as much search diversion as a monopoly platform. Nevertheless, in the case of competing platforms, the equilibrium level of search diversion increases with the degree of horizontal differentiation between platforms.
    Keywords: Competition; Search platforms; Two-sided market
    JEL: L1 L2 L8
    Date: 2013–04

This nep-net issue is ©2013 by Yi-Nung Yang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.