|
on Network Economics |
| By: | Mani , Dalhia; Moody , James |
| Abstract: | A central theme of economic sociology has been to highlight the complexity and diversity of real-world markets, but many network models of economic social structure ignore this feature and rely instead on stylized one-dimensional characterizations. Here, we return to the basic insight of structural diversity in economic sociology. Using the Indian interorganizational ownership network as our case, we discover a composite – or “hybrid” – model of economic networks that combines elements of prior stylized models. The network contains a disconnected periphery conforming closely to a “transactional” model; a semi-periphery characterized by small, dense clusters with sporadic links, as predicted in “small world” models; and finally a nested core composed of clusters connected via multiple independent paths. We then show how a firm’s position within the meso-level structure is associated with demographic features such as age and industry, and differences in the extent to which firms engage in multiplex and high value exchanges. |
| Keywords: | Network; Organization; Structure |
| JEL: | A14 |
| Date: | 2014–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1031&r=net |
| By: | Rossana Mastrandrea; Tiziano Squartini; Giorgio Fagiolo; Diego Garlaschelli |
| Abstract: | In economic and financial networks, the strength (total value of the connections) of a given node has always an important economic meaning, such as the size of supply and demand, import and export, or financial exposure. Constructing null models of networks matching the observed strengths of all nodes is crucial in order to either detect interesting deviations of an empirical network from economically meaningful benchmarks or reconstruct the most likely structure of an economic network when the latter is unknown. However, several studies have proved that real economic networks are topologically very different from networks inferred only from node strengths. Here we provide a detailed analysis for the World Trade Web (WTW) by comparing it to an enhanced null model that simultaneously reproduces the strength and the number of connections of each node. We study several temporal snapshots and different aggregation levels (commodity classes) of the WTW and systematically find that the observed properties are extremely well reproduced by our model. This allows us to introduce the concept of extensive and intensive bias, defined as a measurable tendency of the network to prefer either the formation of new links or the reinforcement of existing ones. We discuss the possible economic interpretation in terms of trade margins. |
| Keywords: | Network reconstruction, null models, Maximum Entropy ensembles, Complex networks, World Trade Web, trade margins |
| Date: | 2014–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2014/06&r=net |
| By: | Jessica E. Schoner; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota) |
| Abstract: | Cities promote strong bicycle networks to support and encourage bicycle com- muting. However, the application of network science to bicycle facilities is not very well studied. Previous work has found relationships between the amount of bicycle infrastructure in a city and aggregate bicycle ridership, and between microscopic network structure and individual tripmaking patterns. This study fills the missing link between these two bodies of literature by developing a standard methodology for measuring bicycle facility network quality at the macroscopic level and testing its association with bicycle commuting. Bicycle infrastructure maps were collected for 74 United States cities and systematically analyzed to evaluate their network structure. Linear regression models revealed that connectivity and directness are important factors in predicting bicycle commuting after controlling for demographic variables and the size of the city. These findings provide a framework for transportation planners and policymakers to evaluate their local bicycle facility networks and set regional priorities that support nonmotorized travel behavior, and for continued research on the structure and quality of bicycle infrastructure and behavior. |
| Keywords: | Bicycling, Travel Behavior, Networks |
| JEL: | R40 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:nex:wpaper:missinglink&r=net |
| By: | Matteo Smerlak; Brady Stoll; Agam Gupta; James S. Magdanz |
| Abstract: | The recent financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent studies of this problem have relied on numerical simulations. In this paper, we report analytical results in a network model of interbank lending based on directly relevant financial parameters such as interest rates and leverage ratios. Using a mean-field approach, we obtain a closed-form formula for the "critical degree", viz. the number of creditors per bank below which an individual shock can cascade throughout the network. We relate the failures distribution (probability that a single shock induces $F$ failures) to the degree distribution (probability that a bank has $k$ creditors), showing in particular that the former is fat-tailed whenever the latter is. Remarkably, our criterion for the onset of contagion turns out to be isomorphic to a simple rule for the evolution of cooperation on graphs and social networks, supporting recent calls for a methodological rapprochement between finance and ecology. |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1402.4783&r=net |
| By: | Malaguti, Maria Chiara; Guerrieri, Alessandra |
| Abstract: | Two-sided payment card markets generate costs that have to be distributed among the participating actors. For this purpose, payment card networks set an interchange fee, which is the fee paid by the merchant’s bank to the cardholder’s bank per transaction. While in recent years many antitrust authorities all over the world - including the European Commission - have opened proceedings against card brands in order to verify whether agreements to collectively establish the level of interchange fees are anticompetitive, the Reserve Bank of Australia – as a regulator - has directly tried to address market failures by lowering the level of interchange fees and changing some network rules. The US has followed with new legislation on financial consumer protection, which also intervenes on interchange fees. This has opened a strong debate not only on legitimacy of interchange fees, but also on the appropriateness of different public tools to address such issues. Drawing from economic and legal theories and a comparative analysis of recent case law in the EU and other jurisdictions, this work investigates whether a regulation rather than a purely competition policy approach would be more appropriate in this field, considering in particular, at EU level, all of the competition and regulatory concerns that have arisen from the operation of SEPA with multilateral interchange fees. The paper concludes that a wider regulation approach could address some of the shortcomings of a purely antitrust approach, proving to be highly beneficial to the development of an efficient European single payments area. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:eps:ecriwp:8860&r=net |
| By: | Bhaskar DasGupta; Lakshmi Kaligounder |
| Abstract: | In [1] Zawadoski introduces a banking network model in which the asset and counter-party risks are treated separately and the banks hedge their assets risks by appropriate OTC contracts. In his model, each bank has only two counter-party neighbors, a bank fails due to the counter-party risk only if at least one of its two neighbors default, and such a counter-party risk is a low probability event. Informally, the author shows that the banks will hedge their asset risks by appropriate OTC contracts, and, though it may be socially optimal to insure against counter-party risk, in equilibrium banks will {\em not} choose to insure this low probability event. In this paper, we consider the above model for more general network topologies, namely when each node has exactly 2r counter-party neighbors for some integer r>0. We extend the analysis of [1] to show that as the number of counter-party neighbors increase the probability of counter-party risk also increases, and in particular the socially optimal solution becomes privately sustainable when each bank hedges its risk to at least n/2 banks, where n is the number of banks in the network, i.e., when 2r is at least n/2, banks not only hedge their asset risk but also hedge its counter-party risk. |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1402.5208&r=net |
| By: | Goux, Dominique (CREST-INSEE); Gurgand, Marc (Paris School of Economics); Maurin, Eric (Paris School of Economics) |
| Abstract: | At the end of middle school, many low achieving students have to abandon hope of getting into selective high-school programs, which may be a source of disappointment and eventually lead them to dropout from high-school. Based on a randomized controlled trial, this paper shows that low-achieving students' aspirations can be made more realistic through a series of meetings facilitated by the school principals and that more realistic aspirations are followed by a significant reduction in grade repetition and high-school dropout. Building on detailed information on friendship networks within classes, we also find evidence that improved outcomes in treated classes encompass improved social interactions between low achieving students and their high achieving classmates. |
| Keywords: | school dropout, tack choices, school aspiration, social networks |
| JEL: | I21 I24 J18 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7948&r=net |
| By: | Tangerås, Thomas (Research Institute of Industrial Economics (IFN)); Tåg, Joacim (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We analyse network competition in a market with international calls. National regulatory agencies (NRAs) have incentives to set regulated termination rates above marginal cost to extract rent from international call termination. International network ownership and deregulation are alternatives to combat the incentives of NRAs to distort termination rates. We provide conditions under which each of these policies increase efficiency and aggregate welfare. Our findings provide theoretical support for recent policy initiatives by the European Commission. |
| Keywords: | Cross-border ownership; Decentralized regulation; International markets; Network |
| JEL: | L51 L96 |
| Date: | 2014–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1005&r=net |
| By: | Mizuno, Takayuki; Souma, Wataru; Watanabe, Tsutomu |
| Abstract: | In this paper, we investigate the structure and evolution of customer-supplier networks in Japan using a unique dataset that contains information on customer and supplier linkages for more than 500,000 incorporated non-financial firms for the five years from 2008 to 2012. We find, first, that the number of customer links is unequal across firms; the customer link distribution has a power-law tail with an exponent of unity (i.e., it follows Zipf’s law). We interpret this as implying that competition among firms to acquire new customers yields winners with a large number of customers, as well as losers with fewer customers. We also show that the shortest path length for any pair of firms is, on average, 4.3 links. Second, we find that link switching is relatively rare. Our estimates indicate that the survival rate per year for customer links is 92 percent and for supplier links 93 percent. Third and finally, we find that firm growth rates tend to be more highly correlated the closer two firms are to each other in a customer-supplier network (i.e., the smaller is the shortest path length for the two firms). This suggests that a non-negligible portion of fluctuations in firm growth stems from the propagation of microeconomic shocks - shocks affecting only a particular firm - through customer-supplier chains. |
| Keywords: | buyer-supplier networks, supply chains, input-output analysis, power-law distributions, firm dynamics |
| JEL: | L11 L14 C67 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:hit:cinwps:27&r=net |
| By: | Muriel Fadairo (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France, Université Jean Monnet, Saint-Etienne, F-42000, France); Jianyu Yu (Research Institute of Economics and Management, Southwest University of Economics and Finance, Chengdu, Sichuan, China, 610074) |
| Abstract: | This paper investigates the rationales of exclusive dealing (ED), which is one of the most common forms of vertical restraint and attracts intense policy debates in anti-trust regulations. Based on a survey of the theoretical literature, we derive several hypotheses relative to the anti- and pro-competitive motivations of ED. These hypotheses are submitted to French data regarding several types of distribution networks in a wide range of sectors. Considering the industry features, our empirical analysis indicates that in the French distribution system, ED contracts tend to be procompetitive. The evidence suggests that the motivation of ED mainly lies in its positive role to foster the investment of upstream firms. |
| Keywords: | Exclusive dealing, Vertical restraints, Competition policy |
| JEL: | C12 L42 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1405&r=net |
| By: | Ben-Yashar, Ruth (Bar-Ilan University); Danziger, Leif (Ben Gurion University) |
| Abstract: | This paper derives a simple characterization of how to optimally divide an organization's experts into different decision-making committees. The focus is on many three-member committees that make decisions by a simple majority rule. We find that the allocation of experts to committees is optimal if and only if it minimizes the sum of the products of the experts' skills in each committee. As a result, given the experts of any two committees, the product of the experts' skills should be as similar as possible in the two committees, and it is never optimal to have the three worst experts in one committee and the three best experts in another. |
| Keywords: | optimal composition of committees, simple majority rule |
| JEL: | D71 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7963&r=net |