nep-net New Economics Papers
on Network Economics
Issue of 2014‒09‒25
five papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Consumer information networks By Simon MIEGIELSEN
  2. Instability and network effects in innovative markets By Paolo Sgrignoli; Elena Agliari; Raffaella Burioni; Augusto Schianchi
  3. Stable Networks in Homogeneous Societies By Tim Hellmann; Jakob Landwehr
  4. Systemic importance of financial institutions: from a global to a local perspective? A network theory approach By Michele Bonollo; Irene Crimaldi; Andrea Flori; Fabio Pammolli; Massimo Riccaboni
  5. Japanese Development Cooperation in a New Era: Recommendations for Network-Based Cooperation By Izumi Ohno

  1. By: Simon MIEGIELSEN
    Abstract: This paper examines the informativeness of consumer information networks and their effect on price competition between .rms. Under the proposed information mechanism, consumers share their initial information with the members of their network and as such become better informed. The main result of this paper shows how informative such networks are by characterizing how many different pieces of information a network is likely to contain. This informativeness is crucial for the degree of competition, as consumers comparing more prices induce firms to compete more fiercely. We find that larger networks imply better information transmission, which intensifies competition and decreases all the percentiles of the price distribution. An increase in the number of firms makes networks more informative, and decreases all the percentiles as well. Our results are robust to the introduction of sequential search and network segregation, but an increase in segregation decreases information transmission and increases all percentiles.
    Date: 2014–06
  2. By: Paolo Sgrignoli; Elena Agliari; Raffaella Burioni; Augusto Schianchi
    Abstract: We consider a network of interacting agents and we model the process of choice on the adoption of a given innovative product by means of statistical-mechanics tools. The modelization allows us to focus on the effects of direct interactions among agents in establishing the success or failure of the product itself. Mimicking real systems, the whole population is divided into two sub-communities called, respectively, Innovators and Followers, where the former are assumed to display more influence power. We study in detail and via numerical simulations on a random graph two different scenarios: no-feedback interaction, where innovators are cohesive and not sensitively affected by the remaining population, and feedback interaction, where the influence of followers on innovators is non negligible. The outcomes are markedly different: in the former case, which corresponds to the creation of a niche in the market, Innovators are able to drive and polarize the whole market. In the latter case the behavior of the market cannot be definitely predicted and become unstable. In both cases we highlight the emergence of collective phenomena and we show how the final outcome, in terms of the number of buyers, is affected by the concentration of innovators and by the interaction strengths among agents.
    Date: 2014–09
  3. By: Tim Hellmann (Center for Mathematical Economics, Bielefeld University); Jakob Landwehr (Center for Mathematical Economics, Bielefeld University)
    Abstract: We study the structure of pairwise stable networks from a very general point. Rather than assuming a particular functional form of utility, we simply assume that the society is homogeneous, i.e. that agents’ utilities differ only with respect to their network position while their names do not matter. Existence of certain stable network structures is then implied by fairly general assumptions on externalities between links. Depending on the form of link externalities, either the empty or complete network are always pairwise stable, stable symmetric networks exist, or stable networks with a connected subgroup exist. If the society becomes more homogeneous, then it is possible to characterize the set of all pairwise stable networks: they are nested split graphs (NSG). We illustrate these results with many examples from the literature, including utility profiles that depend on centrality measures such as Bonacich centrality. In particular, for low discount factors every pairwise stable network is an NSG if utility is given by Bonacich centrality.
    Keywords: Network Formation, Pairwise Stability, Existence, Homogeneity, Convexity, Strategic Complements, Bonacich Centrality
    JEL: A14 C72 D85
    Date: 2014–08
  4. By: Michele Bonollo (Credito trevigiano); Irene Crimaldi (IMT Lucca Institute for Advanced Studies); Andrea Flori (IMT Lucca Institute for Advanced Studies); Fabio Pammolli (IMT Lucca Institute for Advanced Studies); Massimo Riccaboni (IMT Lucca Institute for Advanced Studies)
    Abstract: After the systemic effects of bank defaults during the recent financial crisis, and despite a huge amount of literature over the last years to detect systemic risk, no standard methodologies have been set up until now. We aim to build a concise but comprehensive picture of the state of the art, illustrating the open issues, and outlining pathways for future research. In particular, we propose the analysis of some examples of local systems that attract the attention of the financial sector. This work is directed to both academic researchers and practitioners.
    Keywords: Systemic Risk, Counterparty Risk, Financial Networks, Basel Regulations, European Market Infrastructure Regulation
    JEL: G01 G18 G21
    Date: 2014–09
  5. By: Izumi Ohno (National Graduate Institute for Policy Studies)
    Abstract: The landscape of international development has changed markedly, with the acceleration of global integration and the shaping of the post-2015 development framework. This paper discusses the new era of Japan’s development cooperation from two perspectives—broader and deeper partnerships with the private sector, as well as ‘cooperation and competition’ with Asian emerging donors. It proposes ‘network-based cooperation’ as a central pillar of Japan’s future development cooperation, based on the analyses of the nature of a new wave of internationalization of Japanese manufacturing foreign direct investment (FDI) which involves small-and medium enterprises (SMEs), as well as the extensive local human and organizational networks accumulated in Asia through sixty years of Japan’s official development assistance (ODA). Unique roles of Japan as a mature knowledge partner based on international comparative analysis and a quality leader in global business activity are also discussed. Japan should leverage its distinctive strengths in both the corporate and ODA sectors, and actively embark on the new era of development cooperation.
    Date: 2014–09

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