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on Network Economics |
| By: | Kenan Huremovic (Department of Economics, European University Institute, Italy) |
| Abstract: | Network structure has a significant role in determining the outcomes of many socioeconomic relationships, including the antagonistic ones. In this paper we study a situation in which agents, embedded in a network, simultaneously play interrelated bilateral contest games with their neighbors. Interrelatedness of contests induces complex local and global network effects. We first characterize the equilibrium of a game on an arbitrary fixed network. Then we study a dynamic network formation model, introducing a novel but intuitive link formation protocol. As links represent antagonistic relationships, link formation is unilateral while link destruction is bilateral. A complete k-partite network is the unique stable network topology. As a result, the model provides a micro-foundation for the structural balance concept in social psychology, and the main results go in line with theoretical and empirical findings from other disciplines, including international relations, sociology and biology. |
| Keywords: | Network Formation, Structural Balance, Contest |
| JEL: | D85 D74 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.45&r=all |
| By: | Marco Marinucci (Bank of Italy) |
| Abstract: | This paper provides theoretical background to the increasing R&D cooperation among firms and public research institutions. We find that R&D spillovers may impede cooperation among firms or research institutions even when the cost of forming a link is negligible. Further, the presence of heterogeneous players results in different concepts of network regularity but also increases the number of possible pairwise stable networks. Consequently, stronger concepts of stability are needed to study networks in which players are not homogeneous. |
| Keywords: | networks, innovation, R&D cooperation, spillovers |
| JEL: | C70 L14 O30 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_962_14&r=all |
| By: | Matthew O. Jackson (Department of Economics, Stanford University, Santa Fe Institute and CIFAR); Stephen Nei (Department of Economics, Stanford University) |
| Abstract: | We investigate the role of networks of military alliances in preventing or encouraging wars between groups of countries. A country is vulnerable to attack if there is some fully-allied group of countries that can defeat that country and its (remaining) allies based on a function of their collective military strengths. Even with such a demanding notion of vulnerability, we show that there do not exist any networks that are stable against the addition and deletion of alliances. We then show that economic benefits from international trade can provide incentives to form alliances in ways that restore stability and prevent wars. In closing, we briefly examine the historical data on interstate wars and trade, noting that a dramatic (more than ten-fold) drop in the rate of interstate wars since 1960 is paralleled by an unprecedented growth in trade over the same period. |
| Keywords: | Alliances, Conflict, War, Networks, International Trade, Treaties |
| JEL: | D74 D85 F10 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.46&r=all |
| By: | Berno Buechel (Department of Economics, University of Hamburg); Tim Hellmann (Institute of Mathematical Economics, Bielefeld University); Stefan Kölßner (Statistics and Econometrics, Saarland University) |
| Abstract: | We study a dynamic model of opinion formation in social networks. In our model, boundedly rational agents update opinions by averaging over their neighbors' expressed opinions, but may misrepresent their own opinion by conforming or counter-conforming with their neighbors. We show that an agent's social influence on the long-run group opinion is increasing in network centrality and decreasing in conformity. Concerning efficiency of information aggregation or “wisdom" of the society, it turns out that misrepresentation of opinions need not undermine wisdom, but may even enhance it. Given the network, we provide the optimal distribution of conformity levels in the society and show which agents should be more conforming in order to increase wisdom. |
| Keywords: | Opinion Leadership, Wisdom Of Crowds, Consensus, Social Networks, Conformity, Eigenvector Centrality |
| JEL: | C72 D83 D85 Z13 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.51&r=all |
| By: | Manuel Foerster (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique); Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | We study a stochastic model of influence where agents have "yes" or "no" inclinations on some issue, and opinions may change due to mutual influence among the agents. Each agent independently aggregates the opinions of the other agents and possibly herself. We study influence processes modeled by ordered weighted averaging operators, which are anonymous: they only depend on how many agents share an opinion. For instance, this allows to study situations where the influence process is based on majorities, which are not covered by the classical approach of weighted averaging aggregation. We find a necessary and sufficient condition for convergence to consensus and characterize outcomes where the society ends up polarized. Our results can also be used to understand more general situations, where ordered weighted averages are only used to some extent. Furthermore, we apply our results to fuzzy linguistic quantifiers, i.e., expressions like "most" or "at least a few". |
| Keywords: | Influence; Anonymity; Ordered weighted averaging operator; Convergence; Consensus; Fuzzy linguistic quantifier |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:halshs-00913235&r=all |
| By: | Bhowmik, Anuj |
| Abstract: | We investigate two of the most extensively studied cooperative notions in a pure exchange economy with asymmetric information. One of them is the core and the other is known as coalitional fairness. The set of agents is modelled by a mixed market consisting of some large agents and an ocean of small agents; and the commodity space is an ordered Banach space whose positive cone has an interior point. The information system in our framework is the one introduced by Allen in [1]. Thus, the same agent can have common, private or pooled information when she becomes member of different coalitions. It is shown that the main results in Grodal [20], Schmeidler [26] and Vind [31] can be established when the economy consists of a continuum of small agents. We also focus on the information mechanism based on size of coalitions introduced in [18] and obtain a result similar to the main result in [18]. Finally, we examine the concept of coalitional fairness proposed in [21]. We prove that the core is contained in the set of coalitionally fair allocations under some assumptions. This result provides extensions of Theorem 2 in [21] to an economy with asymmetric information as well as a deterministic economy with infinitely many commodities. Although we consider a general commodity space, all our results were so far unsolved to the case of information sharing rule with finitely many commodities. |
| Keywords: | Asymmetric information economy; coalitional fairness; core; information sharing rule. |
| JEL: | D51 D82 |
| Date: | 2014–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56644&r=all |
| By: | Alexander Elvitar (Centro de Investigación y Docencia Económicas, (CIDE)); Andrei Gomberg (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM)); César Martinelli (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM)); Thomas R. Palfrey (California Institute of Technology) |
| Abstract: | We consider a committee with common interests. Committee members do not know which of two alternatives is the best, but each member may acquire privately a costly signal before casting a vote under either majority or unanimity rule. In the lab, as predicted by Bayesian equilibrium, voters are more likely to acquire information under majority rule, and attempt to counter the bias built in favor of one alternative under unanimity rule. As opposed to Bayesian equilibrium predictions, however, some committee members vote for either alternative when uninformed. Moreover, uninformed voting is correlated with a lower disposition to acquire information. We show that an equilibrium model of subjective prior beliefs may account for this correlation, and provides a good fit for the observed patterns of behavior both in terms of rational ignorance and biases. |
| Keywords: | Condorcet jury theorem, rational ignorance, homemade priors |
| JEL: | D72 D83 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:cie:wpaper:1401&r=all |
| By: | Bussière, M.; Camara, B.; Castellani, F.-D.; Potier, V.; Schmidt, J. |
| Abstract: | As part of the International Banking Research Network, the Banque de France contribution to the research project on liquidity risk transmission concentrates on the “outward”' transmission of shocks affecting French banking groups. Using a rich dataset on their international positions, we analyze which balance sheet vulnerabilities contribute to the international transmission of aggregate liquidity risk shocks. The geographical breakdown of lending allows us to control for demand effects and to concentrate on the external adjustments to shocks affecting the supply of loans. We find that a higher capital ratio is associated with higher growth of lending abroad when aggregate liquidity conditions deteriorate. We find that our results are mainly driven by cross-border lending to the financial sector whereas local lending by foreign affiliates is hardly affected by the balance sheet shocks that the overall banking group is experiencing. We also investigate to what extent the identified effects differ depending on whether banks accessed public liquidity during the crisis and find that our baseline results are sensitive to the inclusion of central bank liquidity assistance. |
| Keywords: | International banking, liquidity risk, shock transmission. |
| JEL: | D24 F36 G21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:485&r=all |
| By: | Manuel Förster (CES, Université Paris 1 Panthéon-Sorbonne, France, and CORE, University of Louvain Louvain-la-Neuve, Belgium); Ana Mauleon (CEREC, Saint-Louis University, Brussels, CORE, University of Louvain, Louvain-la-Neuve, Belgium); Vincent J. Vannetelbosch (CORE, University of Louvain, Louvain-la-Neuve, CEREC, Saint-Louis University, Brussels, Belgium) |
| Abstract: | We investigate the role of manipulation in a model of opinion formation. Agents repeatedly communicate with their neighbors in the social network, can exert effort to manipulate the trust of others, and update their opinions about some common issue by taking weighted averages of neighbors' opinions. The incentives to manipulate are given by the agents' preferences. We show that manipulation can modify the trust structure and lead to a connected society. Manipulation fosters opinion leadership, but the manipulated agent may even gain influence on the long-run opinions. Finally, we investigate the tension between information aggregation and spread of misinformation. |
| Keywords: | Social networks, Trust, Manipulation, Opinion leadership, Consensus, Wisdom of Crowds |
| JEL: | D83 D85 Z13 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.50&r=all |
| By: | Sofia Priazhkina (Department of Economics, Indiana University); Frank Page (Department of Economics, Indiana University) |
| Abstract: | This paper presents a model of collusive bargaining networks. Given a status quo network, game is played in two stages: in the first stage, pairs of sellers form the network by signing two-sided contracts that allow sellers to use connections of other sellers; in the second stage, sellers and buyers bargain for the product. We extend the notion of a pairwise Nash stability with transfers to pairwise Nash stability with contracts and characterize the subgame perfect equilibria. The equilibrium rents are determined for all firms based on their collateral and bargaining power. When a stable equilibrium exists, sharing always generates maximum social welfare and eliminates the frictions created by the network structure. The equilibria depend on the initial network setup, likewise bargaining and contractual procedures. In the homogeneous case, equilibria exist when the number of buyers and sellers are relatively unequal. When the number of buyers exceeds number of sellers, bargaining privileges of sellers over buyers and a low sharing transfer are required for the equilibrium to exist. In the networks with relatively few monopolized sellers, sharing leads to a complete reallocation of surplus to sellers and a zero sharing transfer. When the global market is dominated by sellers, surplus is divided relatively equitably. It is also shown that in the special case of the model with only one monopolistic seller and no market entry, the sharing process organizes sellers in the supply chain order. |
| Keywords: | Social Networks, Oligopoly Pricing, Collusion, Market Sharing Agreements |
| JEL: | L11 L14 L12 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.52&r=all |
| By: | Sanjeev Goyal (Faculty of Economics and Christ's College, University of Cambridge); Stephanie Rosenkranz (Department of Economics, Utrecht University); Utz Weitzel (Department of Economics, Radboud University Nijmegen); Vincent Buskens (Department of Sociology, Utrecht University) |
| Abstract: | The explosion in online social networks motivates an enquiry into their structure and their welfare effects. A central feature of these networks is information sharing: online social networks lower the cost of getting information from others. These lower costs affect the attractiveness of individual search vis-a-vis a reliance on social networks. The paper reports the findings of an experiment on these effects. Our experiment shows that online networks can have large effects. Information acquisition is more dispersed and it is accompanied by denser social networks. Aggregate investment in information acquisition falls, but information available to individuals remains stable, due to increased networking. The overall effect is a significant increase in individual utility and aggregate welfare. |
| Keywords: | Social networks |
| JEL: | D83 D85 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.49&r=all |
| By: | Vitor Miguel Ribeiro (Vitor Miguel Ribeiro - FEP and CEF.UP - Vitor) |
| Abstract: | We develop a duopoly price competition model that establishes a link between the recent literature of two-sided markets and behavior economics. We fully characterize the subgame perfect Nash equilibrium, which depends on the level of …xed costs. Moreover, introducing discrimination between the two sides of the market in terms of the desutility in time, we demonstrate that divide & conquer strategies are present in equilibrium. Finally, we study entry by an inferior-quality platform and entry by a superior-quality platform to conclude that, in both cases, the entry deterrence strategy can be sustain. We conclude that, under the presence of inter-group externalities, the entry deterrence strategy occurs when price competition is softened but the inter-group externalities do not promote a higher presence of an entry deterrence strategy on the market. Finally, entry deterrence strategies may be conducted by an inferior-quality incumbent although less likely relatively to the case where the incumbent has a superior-quality. |
| Keywords: | Two-sided markets, Horizontal differentiation, Vertical differentiation, Behavior Economics. |
| JEL: | D42 D43 L13 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:538&r=all |
| By: | Oliver Falck; Robert Gold; Stephan Heblich |
| Abstract: | This paper analyses the effects on voting behavior of information disseminated over the Internet. We address endogeneity in Internet availability by exploiting regional and technological peculiarities of the preexisting voice telephony network that hindered the roll-out of fixed-line infrastructure for high-speed Internet. We find negative effects of Internet availability on voter turnout, which we relate to a crowding-out of TV consumption and increased entertainment consumption. We find no evidence that the Internet systematically benefits specific parties, suggesting ideological self-segregation in online information consumption. Robustness tests, including placebo estimations from the pre-Internet period, support a causal interpretation of our results. |
| Keywords: | Elections, Mass Media, Internet. |
| JEL: | D72 L82 L86 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:bri:uobdis:14/642&r=all |
| By: | Ahmet Alkan (Sabanci University, Istanbul); Alparslan Tuncay (Sabanci University, Istanbul) |
| Abstract: | Pairing Games or Markets studied here are the non-two-sided NTU generalization of assignment games. We show that the Equilibrium Set is nonempty, that it is the set of stable allocations or the set of semistable allocations, and that it has several notable structural properties. We also introduce the solution concept of pseudostable allocations and show that they are in the Demand Bargaining Set. We give a dynamic Market Procedure that reaches the Equilibrium Set in a bounded number of steps. We use elementary tools of graph theory and a representation theorem obtained here. |
| Keywords: | Stable Matching, Competitive Equilibrium, Market Design, NTU Assignment Game, Roommate Problem, Coalition Formation, Bargaining Set, Bilateral Transaction, Gallai Edmonds Decomposition |
| JEL: | C71 C78 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.48&r=all |
| By: | Nicolas Jacquemet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II); Adam Zylbersztejn (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne) |
| Abstract: | We experimentally study an asymmetric coordination game with two Nash equilibria: one is Pareto-efficient, the other is Pareto-inefficient and involves a weakly dominated strategy. We assess whether information about the interaction partner helps eliminate the imperfect equilibrium. Our treatments involve three information-enhancing mechanisms: repetition and two kinds of individual signals: messages from partner or observation of his past choices. Repetition-based learning increases the frequencies of the most efficient outcome and the most costly strategic mismatch. Moreover, it is superseded by individual signals. Like previous empirical studies, we find that signals provide a screening of partners' intentions that reduces the frequency of coordination failures. Unlike these studies, we find that the transmission of information between partners, either via messages or observation, does not suffice to significantly increase the overall efficiency of outcomes. This happens mostly because information does not restrain the choice of the dominated action by senders. |
| Keywords: | coordination game; communication; cheap-talk; observation |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:halshs-00845123&r=all |