nep-net New Economics Papers
on Network Economics
Issue of 2015‒07‒11
twelve papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Bargaining in Global Communication Networks By Marco Pelliccia
  2. Dynamic of Publication Network in German Photovoltaic Industry By Vasaf, Esmaeil; Sanatkhani, Mahboobeh
  3. The economics of television and online video markets By Gregory S. Crawford
  4. The Great Divergence: A Network Approach By Holger Strulik
  5. Adaptation Strategies of Multinational Corporations, State-Owned Enterprises, and Domestic Business Groups to Economic and Political Transitions: A Network Analysis of the Chilean Telecommunications Sector, 1958- 2005 By Marcelo Bucheli; Erica Salvaj
  6. Decentralised Defence of a (Directed) Network Structure By Marco Pelliccia
  7. Banking Networks and Leverage Dependence: Evidence from Selected Emerging Countries By Diego Aparicio; Daniel Fraiman
  8. The Effects of Leverage Requirements and Fire Sales on Financial Contagion via Asset Liquidation Strategies in Financial Networks By Zachary Feinstein; Fatena El-Masri
  9. Note on ‘Competition in Two-sided Markets’ By Yuyu Zeng; Harold Houba; Gerard van der Laan
  10. Exploring Network Behavior Using Cluster Analysis By Johanna Mollerstrom; Bjørn-Atle Reme; Erik Ø. Sørensen
  11. Exact P-values for Network Interference By Susan Athey; Dean Eckles; Guido W. Imbens
  12. The Role of Foreign Networks for Firm Export of Services By Hatzigeorgiou, Andreas; Lodefalk, Magnus

  1. By: Marco Pelliccia (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We study a Rubinstein-Stahl two-player non-cooperative bargaining game played by n players connected in a communication network. We allow the players to communicate with any peer in the same component via the existing paths connecting the peers in a given communication network (global interaction). The unique stationary subgame perfect equilibrium profile characterizes the players’ expected payoff as function of their betweenness centrality score. Secondly, we study a dynamic link-formation game which allows the players to activate new linkages or sever existing ones in order to increase their bargaining power for a given marginal cost per link. We identify the conditions under which the pairwise stable network structures which arise belong to the family of the nested split graphs. These are graphs where the neighbourhood of each node is contained in the neighbourhoods of nodes with higher degrees.
    Keywords: Communication; Network; Noncooperative bargaining; Network formation.
    JEL: C72 C78 D85
    Date: 2015–05
  2. By: Vasaf, Esmaeil; Sanatkhani, Mahboobeh
    Abstract: Besides high policy-induced motivations for development of research activities in photovoltaic industry, there have been a few social network studies concentrating on the scientific publication in this field. This study tried to shed light on the structure and evolution of publication network in German PV industry from 1988 to 2013. For this purpose, using the centrality indices, I realized the most influential actors as potential source of knowledge and actors who play the central role in knowledge production and diffusion. In next step, I investigated the dynamic of co-authorship network of scientists. Results showed that against the downward trend of network’s cohesion, overall compared to the same size random generated network, German PV co-authorship network is characterized as a small world network which emphasizes the efficient diffusion of knowledge compare to other type of network. Finally, to disclose the drivers behind the evolution of co-authorship network, I hypothesized two different scenarios. First, using descriptive analysis, the existence of preferential attachment mechanism is investigated. Fitting power law distribution over degree of nodes rejected our hypothesis for all investigating time windows. Therefore, preferential attachment mechanism cannot significantly explain the evolution of the network and reveals that network is robust in response to removal of large nodes. Second, looking at the composition of knowledge on map of science provided strong evidence in support of interdisciplinarity nature of German PV industry. Our descriptive analysis shows that along with existence of leading macro-disciplines such as Materials Science and Physics Applied, new subject categories of science have found a significant position over the existing knowledge domain during the observed period.
    Keywords: publication network, PV industry, knowledge diffusion, preferential attachment
    JEL: O30
    Date: 2014–11–10
  3. By: Gregory S. Crawford
    Abstract: Television is the dominant entertainment medium for hundreds of millions. This chapter surveys the economic forces that determine the production and consumption of this content. It presents recent trends in television and online video markets, both in the US and internationally, and describes the state of theoretical and empirical research on these industries. A number of distinct themes emerge, including the growing importance of the pay-television sector, the role played by content providers (channels), distributors, and negotiations between them in determining market outcomes, and concerns about the effects of market power throughout this vertical structure. It also covers important but unsettled topics including the purpose for and effects of both the old (Public Service Broadcasters) and the new (online video markets). Open theoretical and empirical research questions are highlighted throughout.
    Keywords: Economics, television, online video, public service broadcasting, advertising, pay television, bundling, bargaining, market power, net neutrality, foreclosure, policy
    JEL: L82 L86 L32 M37 C72 D40 L40 L50
    Date: 2015–06
  4. By: Holger Strulik (University of Goettingen)
    Abstract: We present a multi-country theory of economic growth in which countries are connected by a network of mutual knowledge exchange. Knowledge in any country depends on the human capital of the countries it exchanges knowledge with. The diffusion of knowledge throughout the world explains a period of increasing world inequality after the take-off of the forerunners of the industrial revolution, followed by decreasing relative inequality. Knowledge diffusion through a Small World network explains the 'New Kaldor facts' and produces an extraordinary diversity of country growth performances, including the overtaking of individual countries in the course of world development.
    Date: 2015
  5. By: Marcelo Bucheli; Erica Salvaj (School of Business and Economics, Universidad del Desarrollo)
    Abstract: This paper compares the corporate network strategies between multinational corporations of two different origins (United States and Spain), business groups, and state-owned enterprises in the public utility sector of a developing country going through economic and political transitions. The transitions we consider are from an import substitution industrialization model to an open market economy and from a democratic regime to a dictatorial one and back to democracy. We analyze the Chilean telecommunications sector between 1958 and 2005 and find that during a democratic regime all firms sought to build more networks with each other, while incentives decrease under an authoritarian regime. In the protectionist era, US investors built links with Chile’s corporate elite, while in times of an open economy, Spanish investors built these links with the government. State-owned corporations did not attempt to build links with other actors at any time, and business groups sought to build most networks among members of the group. Our findings challenge two commonly held assumptions: first, that open economies decrease incentives for domestic actors to build links with each other and, second, that close political regimes increase incentives to build networks among economic actors.
    Date: 2014–09
  6. By: Marco Pelliccia (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We model the decentralised defence choice of agents connected in a directed graph and exposed to an external threat. The network allows the players to receive goods from one or more producers through directed paths. Each agent is endowed with a finite and divisible defence resource that can be allocated to their own security or to that of their peers. The external threat is represented by an intelligent attacker who aims to maximise the flow-disruption by seeking to destroy one node. The set of the attacker’s potential targets is a subset of the set of middleman nodes and producers. These are the critical nodes with highest brokerage power in a directed network and therefore crucial to the system-flow. We show that a decentralised defence allocation is efficient when we assume perfect information: a centralised allocation of defence resources which minimises the flow-disruption coincides with a decentralised allocation. On the other hand, when we assume imperfect information, the decentralised allocation is inefficient and involves no reallocation of defence resources between the nodes. Finally, for a given connected graph, by increasing the link-density we can reduce the set of middleman nodes and thus the number of the potential targets. This also decreases the probability of a successful attack.
    Keywords: Networks; Network defence, Security.
    JEL: C69
    Date: 2015–05
  7. By: Diego Aparicio; Daniel Fraiman
    Abstract: We use bank-level balance sheet data from 2005 to 2010 to study interactions within the banking system of five emerging countries: Argentina, Brazil, Mexico, South Africa, and Taiwan. For each country we construct a financial network based on the leverage ratio dependence between each pair of banks, and find results that are comparable across countries. Banks present a variety of leverage ratio behaviors. This leverage diversity produces financial networks that exhibit a modular structure characterized by one large bank community, some small ones and isolated banks. There exist compact structures that have synchronized dynamics. Many groups of banks merge together creating a financial network topology that converges to a unique big cluster at a relatively low leverage dependence level. Finally, we propose a model that includes corporate and interbank loans for studying the banking system. This model generates networks similar to the empirical ones. Moreover, we find that faster-growing banks tend to be more highly interconnected between them, and this is also observed in empirical data.
    Date: 2015–07
  8. By: Zachary Feinstein; Fatena El-Masri
    Abstract: This paper provides a framework for modeling the financial system with multiple illiquid assets when liquidation of illiquid assets is caused by failure to meet a leverage requirement. This extends the network model of Cifuentes, Shin & Ferrucci (2005) which incorporates a single asset with fire sales and capital adequacy ratio. This also extends the network model of Feinstein (2015) which incorporates multiple illiquid assets with fire sales and no leverage ratios. We prove existence of equilibrium clearing payments and liquidation prices for a known liquidation strategy when leverage requirements are required. We also prove sufficient conditions for the existence of an equilibrium liquidation strategy with corresponding clearing payments and liquidation prices. Finally we calibrate network models to asset and liability data for 50 banks in the United States from 2007-2014 in order to draw conclusions on systemic risk as a function of leverage requirements.
    Date: 2015–07
  9. By: Yuyu Zeng (VU University Amsterdam, the Netherlands); Harold Houba (VU University Amsterdam, the Netherlands); Gerard van der Laan (VU University Amsterdam, the Netherlands)
    Abstract: We extend the models in ("Competition in two-sided markets" of Armstrong (2006, <I>Rand Journal of Economics</I>) by adding within-group externalities. In the monopoly and duopoly cases, positive within-group externalities reduce the price of the own group. Negative externalities have an opposite price effect. In the case of a competitive bottleneck, we show by examples that within a certain range of parameter values, a novel phenomenon arises that the platform attracts more agents from one of the groups compared with the social optimum.
    Keywords: Competition economics; two-sided market
    JEL: D4 L4
  10. By: Johanna Mollerstrom (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Bjørn-Atle Reme (Telenor Research and NHH Norwegian School of Economics); Erik Ø. Sørensen (NHH Norwegian School of Economics)
    Abstract: We conduct a laboratory experiment where third-party spectators can re- distribute resources between two agents, thereby offsetting the consequences of controllable and uncontrollable luck. Some spectators go to the limits and equalize all or no inequalities, but many follow an interior allocation rule previously unaccounted for by the fairness views in the literature. These interior allocators regard an agent’s choice as more important than the cause of her low income and do not always compensate bad un- controllable luck. Instead, they condition such compensation on the agent’s decision regarding controllable luck exposure, even though the two types of luck are independent. Length: 33
    Keywords: fairness, responsibility, option luck, brute luck, experiment
    JEL: C91 D63 D81 H23
    Date: 2015–01
  11. By: Susan Athey; Dean Eckles; Guido W. Imbens
    Abstract: We study the calculation of exact p-values for a large class of non-sharp null hypotheses about treatment effects in a setting with data from experiments involving members of a single connected network. The class includes null hypotheses that limit the effect of one unit's treatment status on another according to the distance between units; for example, the hypothesis might specify that the treatment status of immediate neighbors has no effect, or that units more than two edges away have no effect. We also consider hypotheses concerning the validity of sparsification of a network (for example based on the strength of ties) and hypotheses restricting heterogeneity in peer effects (so that, for example, only the number or fraction treated among neighboring units matters). Our general approach is to define an artificial experiment, such that the null hypothesis that was not sharp for the original experiment is sharp for the artificial experiment, and such that the randomization analysis for the artificial experiment is validated by the design of the original experiment.
    JEL: C01 C1
    Date: 2015–07
  12. By: Hatzigeorgiou, Andreas (The Ratio Institute); Lodefalk, Magnus (Örebro University School of Business)
    Abstract: This study formalizes the idea that that the world can become ‘smaller’ through firms’ strategic trade-related decisions. We investigate whether firm investment in obtaining access to foreign networks impacts exports of services by estimating a fixed effects panel model on a comprehensive firm-level dataset for Sweden. In particular, we examine investment in links through the hiring of immigrants. Because trade barriers are higher for services than for goods, and because trade in services is more sensitive to informal trade barriers, firm investment in access to foreign networks could especially help to increase services exports. However, investment in foreign links could benefit overall access within the same cluster of firms, which reduces the incentive for an individual firm to invest in such linkages itself. The novel results suggest a positive and significant influence of firm investment in foreign networks – through the hiring of foreign-born workers – on both the propensity to export services as well as the intensity of exports. Instrumental variable estimation mitigates endogeneity concerns. Weaker export experience enhances the role of investment in foreign networks in terms of the propensity to export. The skill level of foreignborn workers and the time that has elapsed since immigration also impact the degree to which firms can utilize investment in foreign-born personnel to gain access to networks abroad. Our findings provide a new understanding of how firms can overcome trade barriers that specifically impede services by investing in foreign networks, such as through hiring foreign-born personnel, and emphasize the role of foreign-born population to promote services exports.
    Keywords: networks; firms; trade; services; immigration
    JEL: D80 F10 F22 J61 L14
    Date: 2015–06–29

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