nep-net New Economics Papers
on Network Economics
Issue of 2015‒10‒25
twelve papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Price Discrimination by a Two-sided Platform: with Applications to Advertising and Privacy Design By Doh-Shin Jeon; Byung-Cheol Kim; Domenico Menicucci
  2. Urban networks: Spreading the flow of goods, people and ideas By Edward L. Glaeser; Giacomo A. M. Ponzetto; Yimei Zou
  3. A Snapshot of the Current State of Residential Broadband Networks By Jacob Malone; Aviv Nevo; Jonathan Williams
  4. Networks, Shocks, and Systemic Risk By Daron Acemoglu; Asuman E. Ozdaglar; Alireza Tahbaz Salehi
  5. Trading in Networks: a Classroom Experiment By Paul Johnson; Qiujie Zheng
  6. Liquidity Performance Evaluation of the Brazilian Interbank Market using a Network-Based Approach By Thiago Christiano Silva; Marcos Soares da Silva; Benjamin Miranda Tabak
  7. An Empirical Analysis of a Crowdfunding Platform By Jin-Hyuk Kim; Peter Newberry; Calvin Qiu
  8. Composite likelihood inference for hidden Markov models for dynamic networks By Bartolucci, Francesco; Marino, Maria Francesca; Pandolfi, Silvia
  9. Privacy-Constrained Network Formation By Daron Acemoglu; Ali Makhdoumi; Azarakhsh Malekian; Asuman E. Ozdaglar
  10. Bank Networks: Contagion, Systemic Risk and Prudential Policy By Iñaki Aldasoro; Domenico Delli Gatti; Ester Faia
  11. Networks, Dynamic Factors, and the Volatility Analysis of High-Dimensional Financial Series By Matteo Barigozzi; Marc Hallin
  12. Social Ties in Academia: A Friend is a Treasure By Colussi, Tommaso

  1. By: Doh-Shin Jeon (Toulouse School of Economics and CEPR. Manufacture de Tabacs, 21 allees de Brienne - 31000 Toulouse, France.); Byung-Cheol Kim (School of Economics, Georgia Institute of Technology. 221 Bobby Dodd Way, Atlanta, GA 30332, USA.); Domenico Menicucci (Dipartimento di Scienze per l’Economia e l’impresa, Universit`a degli Studi di Firenze. Via delle Pandette 9, I-50127 Firenze (FI), Italy)
    Abstract: We study price discrimination by a monopoly two-sided platform who mediates interactions between two different groups of agents. We adapt a canonical model of second-degree price discrimination `a la Mussa and Rosen (1978) to a two-sided platform by focusing on non-responsiveness, a clash between the allocation the platform wants to achieve and the incentive compatible allocations. In this framework we address the key question of when a price discrimination on one side complements or substitutes a price discrimination on the other side. We offer two applications on advertising platforms and also highlight the role of commitment in eliciting personal information for targeted advertising.
    Keywords: price discrimination, two-sided markets, non-responsiveness, privacy, advertising, positive/negative sorting
    JEL: D4 D62 D82 M3
    Date: 2015–10
  2. By: Edward L. Glaeser; Giacomo A. M. Ponzetto; Yimei Zou
    Abstract: Should China build mega-cities or a network of linked middle-sized metropolises? Can Europe's mid-sized cities compete with global agglomeration by forging stronger inter-urban links? This paper examines these questions within a model of recombinant growth and endogenous local amenities. Three primary factors determine the trade-off between networks and big cities: local returns to scale in innovation, the elasticity of housing supply, and the importance of local amenities. Even if there are global increasing returns, the returns to local scale in innovation may be decreasing, and that makes networks more appealing than mega-cities. Inelastic housing supply makes it harder to supply more space in dense confines, which perhaps explains why networks are more popular in regulated Europe than in the American Sunbelt. Larger cities can dominate networks because of amenities, as long as the benefits of scale overwhelm the downsides of density. In our framework, the skilled are more likely to prefer mega-cities than the less skilled, and the long-run benefits of either mega-cities or networks may be quite different from the short-run benefits.
    Keywords: Cities, Networks, Growth, Migration
    JEL: R10 R58 F15 O18
    Date: 2015–09
  3. By: Jacob Malone (University of Georgia, Department of Economics, 310 Herty Drive, 535 Brooks Hall, Athens GA 30602); Aviv Nevo (Northwestern University, Department of Economics, 2001 Sheridan Road, Evanston, IL 60208); Jonathan Williams (University of North Carolina - Chapel Hill, Department of Economics, 141 South Road, Gardner Hall 107, CB# 3305, Chapel Hill, NC 27599)
    Abstract: The way in which consumers use the Internet is changing rapidly, and over-the-top video services (OTTV) are a major contributor to this trend. The dramatic rise of OTTV services has led to major changes in the telecommunications sector and greater attention to several important and ongoing public policy debates. We provide an essential component to inform these policy debates: an in-depth descriptive analysis of the rapidly changing way in which consumers use the Internet from a representative sample of consumers. At the core of our contribution are unique data from the spring and summer of 2015 that we acquired from a North American ISP that provides detailed disaggregated high-frequency information on individuals’ Internet usage. We provide insight into temporal patterns in usage within the day, measure persistence in the level and composition of usage across days, and contrast usage patterns for consumers that subscribe to traditional pay TV services (i.e., purchase a bundle of services from the operator) to those that do not. We also present results on how the level and composition of usage for a consumer changes immediately after “cutting the cord” and dropping traditional linear TV service.
    Keywords: Residential Broadband, Demand, Net Neutrality, Usage-based Pricing, Municipal Broadband, Cord Cutting
    JEL: L11 L13 L96
    Date: 2015–09
  4. By: Daron Acemoglu; Asuman E. Ozdaglar; Alireza Tahbaz Salehi
    Date: 2015–10–15
  5. By: Paul Johnson (Department of Economics and Public Policy, University of Alaska Anchorage); Qiujie Zheng (Department of Economics and Public Policy, University of Alaska Anchorage)
    Abstract: This paper describes a classroom experiment that demonstrates coordination and competition between traders in a network. Students test theoretical predictions concerning the emergence of equilibrium and the division of surplus between buyers and sellers. The experiment is appropriate for use in teaching intermediate microeconomics, industrial organization, transportation economics and game theory.
    Keywords: Experimental Economics, Classroom Experiment, Trading in Networks
    JEL: A22 B21 C92
    Date: 2015–10
  6. By: Thiago Christiano Silva; Marcos Soares da Silva; Benjamin Miranda Tabak
    Abstract: In this paper, we employ a comprehensive set of network measurements to assess the determinant factors of banking liquidity performance in the Brazilian interbank network. In our empirical model, we proxy the banking liquidity performance with the liquidity coverage ratio as defined in Basel III. We first show that the Brazilian interbank network has a core-periphery structure and then find that this peculiar network topology can improve liquidity performance of banks. Considering several evidences in the literature pointing to the fact that interbank markets seem to self-organize in core-periphery structures, this finding suggest that interbank systems drive themselves to a network organization that enhances the financial system liquidity. In contrast, we also argue that core-periphery structures can lead to large liquidity shortfalls in the financial network in case a core bank defaults, implying a greater systemic risk. Nonetheless, we show that the default probabilities of core banks are very low in the Brazilian interbank market
    Date: 2015–09
  7. By: Jin-Hyuk Kim (University of Colorado at Boulder, Department of Economics, 256 UCB, Boulder, CO 80309, USA); Peter Newberry (Pennsylvania State University, Department of Economics, 510 Kern Building, University Park, PA 16802); Calvin Qiu (ICF International, 19/F Heng Shan Centre, 145 Queen's Road East, Wan Chai, Hong Kong)
    Abstract: Crowdfunding, a fundraising mechanism in which monetary contributions are raised from a large number of people, is booming and impacting government policy. We study two features of a well-known crowdfunding platform, First, we study the role of observable information in determining whether or not a donor contributes to the project. Second, we study the effect of the all-or-nothing nature of donations. Our counterfactual analyses indicate that the observability of donor information increases the expected quality of funded projects while the conditionality of pledges decreases it.
    Keywords: Crowdfunding; Social learning; Value of information; Free-riding; Voluntary contribution
    JEL: D82 D83 G11 G14 L26 L81
    Date: 2015–09
  8. By: Bartolucci, Francesco; Marino, Maria Francesca; Pandolfi, Silvia
    Abstract: We introduce a hidden Markov model for dynamic network data where directed relations among a set of units are observed at different time occasions. The model can also be used with minor adjustments to deal with undirected networks. In the directional case, dyads referred to each pair of units are explicitly modelled conditional on the latent states of both units. Given the complexity of the model, we propose a composite likelihood method for making inference on its parameters. This method is studied in detail for the directional case by a simulation study in which different scenarios are considered. The proposed approach is illustrated by an example based on the well-known Enron dataset about email exchange.
    Keywords: Dyads; EM algorithm; Enron dataset; Latent Markov models
    JEL: C13 C14 C18 C3
    Date: 2015–10–14
  9. By: Daron Acemoglu; Ali Makhdoumi; Azarakhsh Malekian; Asuman E. Ozdaglar
    Date: 2015–10–15
  10. By: Iñaki Aldasoro; Domenico Delli Gatti (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Ester Faia
    Abstract: We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a matching algorithm. We compare three alternative matching algorithms: maximum entropy, closest matching and random matching. Contagion occurs through liquidity hoarding, interbank interlinkages and fire sale externalities. The resulting network configurations exhibits a core-periphery structure, dis-assortative behavior and low clustering coefficient. We measure systemic importance by means of network centrality and input-output metrics and the contribution of systemic risk by means of Shapley values. Within this framework we analyze the effects of prudential policies on the stability/efficiency trade-off. Liquidity requirements unequivocally decrease systemic risk but at the cost of lower efficiency (measured by aggregate investment in non-liquid assets); equity requirements tend to reduce risk (hence increase stability) without reducing significantly overall investment.
    Keywords: banking networks, centrality metrics, systemic risk
    JEL: D85 G21 G28 C63 L14
    Date: 2015–07
  11. By: Matteo Barigozzi; Marc Hallin
    Abstract: In this paper, we define weighted directed networks for large panels of financial time series where the edges and the associated weights are reflecting the dynamic conditional correlation structure of the panel. Those networks produce a most informative picture of the interconnections among the various series in the panel. In particular, we are combining this network-based analysis and a general dynamic factor decomposition in a study of the volatilities of the stocks of the Standard \&Poor's 100 index over the period 2000-2013. This approach allows us to decompose the panel into two components which represent the two main sources of variation of financial time series: common or market shocks, and the stock-specific or idiosyncratic ones. While the common components, driven by market shocks, are related to the non-diversifiable or {\it systematic} components of risk, the idiosyncratic components show important interdependencies which are nicely described through network structures. Those networks shed some light on the contagion phenomenons associated with financial crises, and help assessing how {\it systemic} a given firm is likely to be. We show how to estimate them by combining dynamic principal components and sparse VAR techniques. The results provide evidence of high positive intra-sectoral and lower, but nevertheless quite important, negative inter-sectoral, dependencies, the Energy and Financials sectors being the most interconnected ones. In particular, the Financials stocks appear to be the most central vertices in the network, making them the main source of contagion.
    Date: 2015–10
  12. By: Colussi, Tommaso (IZA)
    Abstract: This paper employs a unique dataset on articles, authors and editors of the top general interest journals in economics to investigate the role of social connections in the publication process. Ties between editors and authors are identified based on their academic histories. Results show that an editor's former PhD students and faculty colleagues experience an increase in their publication outcomes when this editor is in charge of a journal. The analysis of articles' citations suggests that connections ultimately improve the quality of published papers.
    Keywords: academia, networks, human capital
    JEL: A1 I23 J24
    Date: 2015–10

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