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on Network Economics |
| By: | Kibae Kim (Technology Management, Economics, and Policy Program; College of Engineering; Seoul National University); Jörn Altmann (Technology Management, Economics, and Policy Program; College of Engineering; Seoul National University) |
| Abstract: | As empirical studies have found that large complex networks (e.g., WWW) are scale-free, the preferential attachment model is commonly applied to generate this network topology. This model assumes a node with higher degree is more likely to gain a new link, and ignore node attributes except the node degree. However, recent empirical studies also found that node attributes are not identical across all nodes of a network, and a node prefers connecting to other nodes with similar attributes. This preference is called homophily. Therefore, the research question rises whether the preferential attachment model always generates a scale-free network if homophily exists. In this paper, we explore the effect of homophily on network evolution by applying the preferential attachment model with homophily to five different seed networks (i.e., a single dipole, a multiple dipoles, a ring, a star, and a random network). Our simulation results for all five seed networks suggest that homophily distorts the network evolution of a scale-free network, which has a concavely shaped cumulative degree distribution, towards a convexly shaped cumulative degree distribution. These results can explain why some of the empirical complex networks show a linear cumulative degree distribution in log-log scale while others show either concave or convex shape. The implication of our results calls for attention when applying network formation models to complex network studies. These models should consider not only the graph theoretic properties but also node attributes, depending on the environment that governs the network evolution. |
| Keywords: | Network Evolution, Scale-Free Networks, Preferential Attachment Rule, Homophily, Concave/Convex Power-Law. |
| JEL: | A12 C63 C73 D85 Z13 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:snv:dp2009:2015121&r=net |
| By: | Silvia Gabrieli and Co-Pierre Georg |
| Abstract: | We study the liquidity allocation among European banks around the Lehman insolvency using a novel dataset of all interbank loans settled via the Eurosystem’s payment system TARGET2. Following the Lehman insolvency, lenders in the overnight segment become sensitive to counterparty characteristics and banks start hoarding liquidity by shortening the maturity of their interbank lending. This aggregate change in liquidity reallocation is accompanied by a substantial structural change that can best be characterized as a shrinking of the interbank network. Such a change in the network structure is consequential: banks with higher centrality within the network have better access to liquidity and are able to charge larger intermediation spreads. Therefore, we show the existence of a sizeable interbank lending channel. |
| Keywords: | Interbank loans, network topology, Financial Stability |
| JEL: | D85 E5 G1 G21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:488&r=net |
| By: | Offerman, Theo; Schram, Arthur; Van Leeuwen, Boris |
| Abstract: | We investigate a mechanism that facilitates the provision of public goods in a network formation game. We show how competition for status encourages a core player to realize efficiency gains for the entire group. In a laboratory experiment we systematically examine the effects of group size and status rents. The experimental results provide very clear support for a competition for status dynamic that predicts when, and if so which, repeated game equilibrium is reached. Two control treatments allow us to reject the possibility that the supergame effects we observe are driven by social motives. |
| JEL: | C91 D85 H41 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:tse:iastwp:28902&r=net |
| By: | Silvia Rita Sedita (University of Padova); Roberta Apa (University of Padova) |
| Abstract: | Our work aims to analyze the inter-organizational relationships of contractors in public procurement projects. We investigate how a firm’s network position affects its performance in public procurement practices, measured as the average value of projects won by the firm. To accomplish this objective, we adopt a social network analysis approach to analyze contractor networks. Our evidence comes from an empirical analysis of the network positions of general contractor firms involved in public procurement projects in the construction industry in the Veneto region from 2008 to 2012. Firm performance is affected by firm partnering practices, which are measured in terms of network centrality indicators. We explore how partnering ability, closeness and brokerage influence firm performance and find that a firm’s partnering ability (i.e., the number of direct firm ties within a public procurement network) is crucial in determining the success of the firm’s public procurement practices. Finally, we propose managerial and policy implications for potential regional development. |
| Keywords: | construction industry; project organizing; public procurement, social network analysis, firm performance. |
| JEL: | L14 L74 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0193&r=net |
| By: | Haucap, Justus; Heimesho, Ulrich; Lange, Mirjam R. J. |
| Abstract: | This paper provides an empirical analysis how tariff diversity aspects fixed-line broad-band uptake, utilizing a new data set with 1497 fixed-line and 2158 mobile broad-band tariffs from 91 countries across the globe. An instrumental variable approach is applied to estimate demand, controlling for various industry and socio-economic factors. The empirical results indicate that, firstly, lower prices, more tariff diver-sity and higher income increase broadband penetration. Secondly, inter-platform competition and mobile broadband prices are not found to have a significant effect on fixed-line broadband penetration. This suggests that low prices and the diver-sity of broadband offerings are more important drivers of fixed broadband adoption than competition between various technologies (cable networks, fixed-line telephone networks, mobile networks). |
| Keywords: | Broadband prices,Tariff diversity,Broadband demand,Broadband penetration,Broadband uptake,Price discrimination,Inter-platform competition |
| JEL: | L86 L96 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb14:106898&r=net |
| By: | Edoardo Gaffeo; Lucio gobbi |
| Abstract: | he bilateral netting of mutual obligations is an institutional arrange- ment usually employed in payment systems to reduce settlement risks. In this paper we explore its advantages and pitfalls when applied to an inter- bank lending market, in which banks extend credit to ñand borrow from ñother banks to adjust their short-term liquidity needs. By recurring to computer simulations, we show that bilateral netting considerably reduce the potential for default cascades over an interbank network whenever the source of contagion is a negative shock to the assets of a randomly chosen bank. When the shock hits the liability side of the balance sheet ñas a run on deposits ñthe role of a bilateral netting agreement in mitigating the risk of a systemic liquidity crisis depends critically on the topological characteristics of the interbank network, however. |
| Keywords: | Bilateral netting, financial networks, contagion |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpem:2015/02&r=net |
| By: | Anton Badev (Federal Reserve Board) |
| Abstract: | This paper develops a framework for analyzing individuals' choices in the presence of endogenous social networks and implements it with data on teen smoking decisions and friendship networks. By allowing actions and friendships to be jointly chosen, the framework extends the literature on social interactions, which either models choices, taking the social network as given, or which models friendship selection without incorporating additional choices. In the context of a large population network game, this paper also introduces the notion of k-player Nash stability. This solution concept subsumes the Nash equilibrium and, as k decreases, gradually relaxes the assumptions of rationality and coordination underlying the Nash play. I show how the strategic interactions of the static one-shot play are embedded in an evolutionary model of network formation, which I estimate with social network data from United States high schools. The empirical analysis demonstrates the importance of modeling the joint decisions of friendships and smoking in evaluating existing and proposed new policies targeting teen smoking prevalence. These include policies related to school racial desegregation, separating middle and high school grades, and anti-smoking campaigns. Neglecting the endogeneity of the friendship network leads to a downward bias of 10% to 15% on the predicted effect of these policies on adolescent smoking rates. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:901&r=net |
| By: | Fontana, Magda; Terna, Pietro (University of Turin) |
| Abstract: | An important perspective use of Agent-based models (ABMs) is that of being employed as tools to support decision systems in policy-making, in the complex systems framework. Such models can be usefully employed at two different levels: to help in deciding (policy-maker level) and to empower the capabilities of people in evaluating the effectiveness of policies (citizen level). Consequently, the class of ABMs for policymaking needs to be both quite simple in its structure and highly sophisticated in its outcomes. The pursuing of simplicity and sophistication can be made more effective by applying network analysis to the emergent results. Actually, in today’s world the consequences of choices and decisions and their effects on society, and on its organization, are equally relevant. Considering the agent-based and network techniques together, we have a further important possibility. Since it is easier to have network data (i.e. social network data) than detailed behavioral individual information, we can try to understand the relationships between the dynamic changes of the networks emerging from agent-based models and the behavior of the agents. As we understand these connections, we can apply them to actual networks, to try to understand what the behavioral black boxes of real-world agents contain. We propose a simple basic structure where events, scheduled upon time, call upon agents to behave, to modify their context, and to create new structures of links among them. Events are organized as collections of small acts and steps. The metaphor is that of a recipe, i.e. a set of directions with a list of ingredients for making or preparing something, especially food (as defined in the American Heritage dictionary). Technically, recipes are sequences of numerical or alphanumerical codes, reported in vectors, and move from an agent to another determining the events and generating the edges of the emerging networks. A basic code will be shown, useful to manage possible applications in different fields: production, health-care scenarios, paper co-authorship, opinion spreading, etc. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:uto:dipeco:201507&r=net |
| By: | Bourna, Maria; Mitomo, Hitoshi |
| Abstract: | Improved internet connectivity has been a consistent aim of Japanese telecommunications policy in the past decades, however, despite the high availability of high speed and ultra-high speed broadband services, actual use has yet to match network capacity. This study hopes to explore this paradox by looking at the factors that affect demand for broadband services. To achieve this, the relationship between overall broadband adoption and two basic demand factors, namely price of internet services and presence of a competitor in the form of wireless broadband, was examined over a 12-year period. The findings suggest that the lag in adoption can be attributed to both a higher demand for wireless connectivity and high broadband contract prices, while network effects may play a positive role in diffusion. Given that Japanese broadband policy has tended to focus more on the role of price as a mechanism for improving penetration, this study ultimately contributes to the discussion of policy efficiency by providing some empirical basis for the consideration of alternative demand-side incentives. |
| Keywords: | broadband adoption,Japan,mobile internet |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb14:106887&r=net |
| By: | Bruno Jullien; Alessandro Pavan |
| Abstract: | We study monopoly and duopoly pricing in a two-sided market with dispersed information about users’ preferences. First, we show how the dispersion of information introduces idiosyncratic uncertainty about participation rates and how the latter shapes the elasticity of the demands and thereby the equilibrium prices. We then study informative advertising campaigns affecting the agents’ ability to estimate their own as well as other agents’ valuations, and product design affecting the distribution of valuations on the two sides of the market. |
| Keywords: | two-sided markets, dispersed information, platform competition, global-games, informative advertising JEL Classification: D82 |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:nwu:cmsems:1568r&r=net |
| By: | Belau, Julia |
| Abstract: | This paper suggests a new approach for centrality measures for general (weighted) networks taking into account the importance for cohesion and relative power of connections. While existing literature either ignores the importance for cohesion or measures it by analyzing consequences arising from the failure of whole nodes, this approach analyzes consequences of tie failures. Using cooperative game theory, we assign weights to every tie of the network where the cooperative game accounts for the cohesion of the network. These weights are combined with the weights of the original network where emphasis for the latter and for cohesion can be regulated individually. Then, the degree measure and Eigenvector measure are applied. This provides the first centrality approach accounting for cohesion and relative importance/power of connections. We provide axiomatic characterizations for the degreebased measures in the case of binary networks and discuss computational complexity. Furthermore, we give examples discussing the drawbacks of existing measures in contrast to our suggested one and as a political application, we show how our Approach can be used to forcast government formation by the case of the state parliament election in Hamburg, Germany. |
| JEL: | C71 D72 D85 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100368&r=net |
| By: | Marcel Fafchamps; Simon Quinn |
| Abstract: | We run a novel field experiment to link managers of African manufacturing firms. The experiment features exogenous link formation, exogenous seeding of information and exogenous assignment to treatment and placebo. We study the impact of the experiment on firm business practices outside of the lab. We find that the experiment successfully created new variation in social networks. We find some limited evidence of diffusion of management practices, particularly in terms of firm formalisation and innovation. Such diffusion appears to be a combination of diffusion of innovation and simple imitation. |
| JEL: | D22 L26 O33 |
| Date: | 2014–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:wps/2014-25&r=net |
| By: | Dorota Celińska (Faculty of Economic Sciences, University of Warsaw); Mirosława Lasek (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | This article analyses the phenomenon of using the Open Source software. Its aim is to verify the existence of a positive direct network effect that characterizes using of the Open Source software. The multivariate probit model is used to extract factors motivating users to the usage of the Open Source software. Special attention is paid to demographic characteristics of users, as well as to the impact of users' acquaintances, such as family, work and school on using the Open Source software. The results of the conducted analysis confirm our research. |
| Keywords: | Open Source, software, source code, end user characteristics, network effect, multivariate probit, motivation |
| JEL: | L17 L86 C38 D12 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2015-05&r=net |
| By: | Cortinhal, M. J.; Lopes, M. J.; Melo, M. T. |
| Abstract: | We address the problem of designing/redesigning a multi-echelon logistics network over a multi-period planning horizon. Strategic decisions comprise opening new plants and warehouses at candidate sites and selecting their capacities from a set of available discrete sizes. Capacity expansion may occur more than once over the time horizon both at new locations and at existing facilities. Capacity contraction is a viable option as well that involves closing existing plants and/or warehouses. The operation of the network is also subject to logistics decisions involving supplier selection in conjunction with procurement, production, and distribution of multiple products. Distribution channels are to be identified in each time period as well as the modes of transportation for raw materials and end products. Finally, a strategic choice between in-house manufacturing and a mixed approach with product outsourcing is to be taken. We propose a mixed-integer linear programming model and develop several valid inequalities to enhance the original formulation. To gain insight into the complexity of the problem at hand, an extensive computational study is performed with randomly generated instances that are solved with standard mathematical optimization software. Useful managerial insights are derived from varying several parameters and analyzing the impact of different business strategies on various segments of the logistics network. |
| Keywords: | logistics network design/re-design,multiple periods,transportation mode selection,product outsourcing,mixed-integer linear programming |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:htwlog:7&r=net |
| By: | Jeffrey Chwieroth; Cohen Simpson; Andrew Walter |
| Abstract: | Sovereign default is often associated with the downfall of incumbent governments in democratic polities. Existing scholarship directs attention to the relationship between default and domestic politics and institutions rather than the broader international environment wherein repayment and default take place. We explore the possibility that the impact of a country’s decision to default on partisan survival will also be shaped by the prevalence of default amongst its peers in its local network. Illustrating this line of reasoning with international trade, our results support the argument that given networked default, voters see national default as a lost strategic opportunity to elevate a country’s reputation and are more inclined to punish incumbent regimes who fail to repay. These results are inconsistent with an alternative possibility — that networked default might contribute to the decay of a repayment norm and thus provide a justifiable “excuse” for default at home. Furthermore, our results are robust to alternative measures of regime governance and entropy balancing in light of systematic differences between defaulting and non-defaulting regimes. Overall, our findings point to the political interdependence of default and repayment and the need for political scientists to take greater account of network effects in analyzing the consequences of economic misbehavior. |
| Keywords: | Sovereign Default; Debt Crises; Political Survival; Networks; Voter Behavior. |
| JEL: | H63 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60929&r=net |
| By: | Orlova, Ekaterina; Hubert, Franz |
| Abstract: | We study the impact of the liberalization of EU natural gas markets on the balance of power between `local champions', customers, and outside producers. We distinguish between two steps of the reform: 1. opening access to transit pipes and 2. opening access to distribution systems, hence customers. Using the Shapley value as a power index, we find a modest and rather heterogeneous impact from the first step. The impact of the second step is much larger and yields a clear pattern: all local champions lose, while all customers and all outside players gain. As one third of the losses of champions within EU leaks to players abroad, current reforms might enhance the dominance of already powerful outside producers. This effect, however, completely vanishes, when network power is assessed with the nucleolus. |
| JEL: | L51 L95 C71 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100474&r=net |
| By: | Shin, Dong-Hee; Lee, Jaegil; Kim, Nam Cheol; Jung, Jaeyoel |
| Abstract: | In this study, we compare and contrast the U.S. and Korea in the context of network neutrality, focusing on debates among stakeholders and regulatory approaches. Interesting similarities and differences are highlighted by comparisons within the broadband ecosystem framework: government functions, histories, people's perceptions, regulatory approaches, legislative initiatives, and implementation. In Korea, there is an existing regulatory framework with suggestive guidelines that can be used to address net neutrality in a case-by-case fashion. The U.S. follows a regulatory approach by creating enforceable non-discrimination rules. Our findings suggest that the issue is not only complicated, but also as complex and vague as the parties' diverse interests are. We conclude that a careful combination of government coordination and market forces is an effective way to govern net neutrality. |
| Keywords: | Network neutrality,comparative case study,Korea,the U.S.,broadband,competition |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb14:106865&r=net |