nep-net New Economics Papers
on Network Economics
Issue of 2015‒11‒21
three papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. An empirical analysis of the global input-output network and its evolution By Jakob Grazzini; Alessandro Spelta
  2. Contagion in Financial Networks By Paul Glasserman; Peyton Young
  3. Diffusing Coordination Risk By Zhen Zhou; Deepal Basak

  1. By: Jakob Grazzini (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Alessandro Spelta (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: Data, without a model, are just numbers. The analysis of networks in economics should take into account how economic agents react to exogenous shocks. In order to determine the centrality of a node in the global input-output network, we analyze the network through the lenses of an economic model calibrated on empirical data. We show that formalizing the nodes as firms, and modeling the links as the result of firms' behavior (trade), is impor- tant for the economic interpretation of the network topology. Moreover, using the calibrated model, we define a fragility index that measures the ability of the system to absorb exogenous shocks. We find that the fragility of the production network has increased from 1995 to 2011.
    Keywords: Input-output, Network, Fragility.
    JEL: C67
    Date: 2015–10
  2. By: Paul Glasserman; Peyton Young
    JEL: G01 D85
    Date: 2015–11–16
  3. By: Zhen Zhou (New York University); Deepal Basak (NYU)
    Abstract: This paper designs an optimal mechanism to correct coordination failure. A planner wants her agents to coordinate on a cooperative action. Agents gather noisy private information regarding the underlying fundamental and decide whether to cooperate or not. The global game literature uniquely identifies the chance of coordination failure when the coordination risk is concentrated at one point in time. We analyze the case when the planner diffuses the coordination risk over time. The planner approaches the agents sequentially - only a proportion of agents at a time and advancing further only when the coordination failure has been averted so far. The public information of survival works as a coordination device and helps in mitigating the coordination risk. We show that if the planner can diffuse the coordination risk enough, then she can achieve the first best as the unique equilibrium outcome. However, if the planner has only limited power to diffuse the coordination risk, multiple equilibria can arise. A max-min planner should diffuse the coordination risk as much as possible. We also show that if some groups are more reluctant to cooperate than others, a max-min planner should approach the more reluctant groups first. Our mechanism is robust to various generalizations and can be applied to a wide range of coordination games.
    Date: 2015

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