nep-net New Economics Papers
on Network Economics
Issue of 2015‒12‒12
eleven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Constitutions and Social Networks By Ana Mauleon; Nils Roehl; Vincent Vannetelbosch
  2. Multilateral Bargaining in Networks: On the Prevalence of Inefficiencies By Joosung Lee
  3. An experimental study of sorting in group contests By Philip Brookins; John P. Lightle; Dmitry Ryvkin
  4. Autonomous coalitions By Stéphane Gonzalez; Michel Grabisch
  5. Levelling the Playing Field: On the Missing Role of Network Externality in Designing Renewable Energy Technology Deployment Policies By Wei Jin; ZhongXiang Zhang
  6. Positive Freedom in Networked Capitalism: An Empirical Analysis By Davide Carbonai; Carlo Drago
  7. On the Interaction between Player Heterogeneity and Partner Heterogeneity in Two-way Flow Strict Nash Networks By Banchongsan Charoensook
  8. Networks of Many Public Goods with Non-Linear Best Replies By Yann Rébillé; Lionel Richefort
  9. The network structure of city-firm relations By Antonios Garas; Celine Rozenblat; Frank Schweitzer
  10. An Attempt to Disperse the Italian Interlocking Directorship Network: Analyzing the Effects of the 2011 Reform By Carlo Drago; Roberto Ricciuti; Paolo Santella
  11. Contagion Risk and Network Design By Diego Cerdeiro; Marcin Dziubinski; Sanjeev Goyal

  1. By: Ana Mauleon (CEREC, Saint-Louis University ?Brussels and CORE, University of Louvain, Belgium); Nils Roehl (University of Paderborn and Bielefeld University, Germany); Vincent Vannetelbosch (CORE, University of Louvain and CEREC, Saint-Louis University ?Brussels, Belgium)
    Abstract: The objective of the paper is to analyze the formation of social networks where individuals are allowed to engage in several groups at the same time. These group structures are interpreted here as social networks. Each group is supposed to have specific rules or constitutions governing which members may join or leave it. Given these constitutions, we consider a social network to be stable if no group is modified any more. We provide requirements on constitutions and players’ preferences under which stable social networks are induced for sure. Furthermore, by embedding many-to-many matchings into our setting, we apply our model to job markets with labor unions. To some extent the unions may provide job guarantees and, therefore, have influence on the stability of the job market.
    Keywords: Social Networks, Constitutions, Stability, Many-to-Many Matchings
    JEL: C72 C78 D85
    Date: 2015–06
  2. By: Joosung Lee (University of Edinburgh, United Kingdom)
    Abstract: We introduce a noncooperative multilateral bargaining model for a network-restricted environment, in which players can communicate only with their neighbors. Each player strategically chooses the bargaining partners among the neighbors to buy out their communication links with upfront transfers. The main theorem characterizes a condition on network structures for efficient equilibria and shows the prevalence of strategic delays. If the underlying network is either complete or circular, then an efficient stationary subgame perfect equilibrium exists for all discount factors: all the players always try to reach an agreement as soon as practicable and hence no strategic delay occurs. In any other network, however, an efficient equilibrium is impossible for sufficiently high discount factors because some players strategically delay an agreement. We also provide an example of a Braess-like paradox, in which the more links are available, the less links are actually used. Thus, network improvements may decrease social welfare
    Keywords: Noncooperative Bargaining, Coalition Formation, Communication Restriction, Buyout, Network, Braess's Paradox
    JEL: C72 C78 D72 D74 D85
    Date: 2015–06
  3. By: Philip Brookins (Department of Economics, Florida State University); John P. Lightle (Department of Economics, Virginia Commonwealth University); Dmitry Ryvkin (Department of Economics, Florida State University)
    Abstract: We experimentally explore the effects of sorting and communication in lottery contests between groups of heterogeneous players whose within-group efforts are perfect complements. Subjects are assigned a type -- A, B, C or D -- that determines their cost of effort, with A having the lowest cost and D the highest cost, and are then assigned to one of the two two-player groups competing in the contest. Theory predicts that aggregate contest output increases in the variation in abilities between groups, i.e., the output is maximized by the most unbalanced sorting of players into groups -- (A,B) vs. (C,D) -- and minimized by the most balanced sorting -- (A,D) vs. (B,C). That is, the equilibrium prediction goes against the "competitive balance" heuristic. In the absence of communication, this prediction is directionally confirmed, although the effect is not statistically significant. In the presence of within-group communication, however, we find that total output is 33% higher under the balanced sorting as compared to the unbalanced sorting -- a reversal of the prediction, but in line with the heuristic. This result is driven by an increase in output by (B,C) groups under the balanced sorting and a strong decrease in output by the underdog (C,D) groups under the unbalanced sorting, relative to no communication. These results are at odds with previous studies that find that within-group communication always increases output, and suggest that the effect of communication depends strongly on the configuration of heterogeneity between and within groups. Competitive balance is confirmed as a robust sorting heuristic for sustaining competition and high effort provision in group contests.
    Keywords: group contest, sorting, complementarity, heterogeneous players, experiment
    JEL: C72 C91 D72 M54
    Date: 2015–12
  4. By: Stéphane Gonzalez (Université Jean Monnet - Saint-Etienne, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)
    Abstract: We consider in this paper solutions for TU-games where it is not assumed that the grand coalition is necessarily the final state of cooperation. Partitions of the grand coalition, or balanced collections together with a system of balancing weights interpreted as a time allocation vector are considered as possible states of cooperation. The former case corresponds to the c-core, while the latter corresponds to the aspiration core or d-core, where in both case, the best configuration (called a maximising collection) is sought. We study maximising collections and characterize them with autonomous coalitions, that is, coalitions for which any solution of the d-core yields a payment for that coalition equal to its worth. In particular we show that the collection of autonomous coalitions is balanced, and that one cannot have at the same time a single possible payment (core element) and a single possible configuration. We also introduce the notion of inescapable coalitions, that is, those present in every maximising collection. We characterize the class of games for which the sets of autonomous coalitions, vital coalitions (in the sense of Shellshear and Sudhölter), and inescapable coalitions coincide, and prove that the set of games having a unique maximising coalition is dense in the set of games.
    Keywords: cooperative game,core,balancedness,c-core,aspiration core,coalition formation,autonomous coalitions JEL Classification: C71
    Date: 2015
  5. By: Wei Jin (School of Public Policy, Zhejiang University, Hangzhou, China); ZhongXiang Zhang (College of Management and Economics, Tianjin University, Tianjin, China)
    Abstract: In creating a level playing field that facilitates the deployment of renewable energy technology (RET), the traditional energy policy regime based on eliminating RET’s cost gaps versus fossil energy technology (FET) may be not sufficient. Building on an economic model of energy technology adoption that features network externality, this paper takes an explicit account of the potential importance of network externality in the design of RET adoption policies. We argue that as incumbent FET has established pervasive deployment and installed base advantages within the existing energy production, distribution and service network, it would create a network externality mechanism that makes it difficult to dislodge the dominant FET-based technological regime, leading to an inertia against the adoption of newly emerging RET even if energy policy regulations have been put in place to eliminate RET’s cost disadvantage. We hence propose that a reformulation of RET policy paradigm should consider extending the traditional scheme centring on eliminating cost gap to a new one that corrects for both cost and network externality gaps
    Keywords: Renewable Energy Deployment, Energy Technology Adoption, Network Externality, Climate Technology Policies
    JEL: Q41 Q42 Q48 Q54 Q55 Q58 H23 O13
    Date: 2015–09
  6. By: Davide Carbonai (Universidade Federal do Rio Grande do Sul, Brazil); Carlo Drago (University of Rome "Niccolò Cusano", Italy)
    Abstract: The article proposes a social network analysis of the main European capitalisms and its correspondence with an index of economic freedom. The analysis relates to two kinds of economic liberties taken from the concept of freedom formulated by Isaiah Berlin. While the first kind of freedom (negative freedom) depends on the external system (e.g. the constraints on the firm defined by the regulations), the second refers to the internal obligations within the business system itself that prevent the free exercise of business (positive freedom): specifically, the social network, in which the company is embedded. After an operationalization of the two concepts of freedom, the analysis of a comprehensive database allows us to explore the relationship between the two kinds of freedom.
    Keywords: Social Network Analysis, Antitrust Policies, Interlocking Directorates, Europe, Positive Freedom, Negative Freedom
    JEL: L4 P
    Date: 2015–10
  7. By: Banchongsan Charoensook (Keimyung University, Republic of Korea)
    Abstract: This paper brings together analyses of two-way flow Strict Nash networks under exclusive player heterogeneity assumption and exclusive partner heterogeneity assumption. This is achieved through examining how the interactions between these two assumptions influence important properties of Strict Nash networks. Built upon the findings of Billand et al (2011) and Galleotti et al (2006), which assume exclusive partner heterogeneity and exclusive player heterogeneity respectively, I provide a proposition that generalizes the results of these two models by stating that: (i) Strict Nash network consists of multiple non-empty components as in Galleotti et al (2006), and (ii) each non-empty component is a branching or Bi network as in Billand et al (2011). This proposition requires that a certain restriction on link formation cost (called Uniform Partner Ranking), which encloses exclusive partner heterogeneity and exclusive player heterogeneity as a specific case, is satisfied. In addition, this paper shows that value heterogeneity plays a relatively less important role in changing the shapes of Strict Nash networks.
    Keywords: Network Formation, Strict Nash Network, Two-way Flow Network, Branching Network, Agent Heterogeneity
    JEL: C72 D85
    Date: 2015–05
  8. By: Yann Rébillé (LEMNA, Université de Nantes); Lionel Richefort (LEMNA, Université de Nantes)
    Abstract: We model a bipartite network in which links connect agents with public goods. Agents play a voluntary contribution game in which they decide how much to contribute to each public good they are connected to. We show that the problem of finding a Nash equilibrium can be posed as a non-linear complementarity one. The existence of an equilibrium point is established for a wide class of individual preferences. We then find a simple sufficient condition, on network structure only, that guarantees the uniqueness of the equilibria, and provide an easy procedure for building networks that respects this condition.
    Keywords: Bipartite Graph, Public Good, Nash Equilibrium, Non-Linear, Complementarity Problem
    JEL: C72 D85 H41
    Date: 2015–06
  9. By: Antonios Garas; Celine Rozenblat; Frank Schweitzer
    Abstract: How are economic activities linked to geographic locations? To answer this question, we use a data-driven approach that builds on the information about location, ownership and economic activities of the world's 3,000 largest firms and their almost one million subsidiaries. From this information we generate a bipartite network of cities linked to economic activities. Analysing the structure of this network, we find striking similarities with nested networks observed in ecology, where links represent mutualistic interactions between species. This motivates us to apply ecological indicators to identify the unbalanced deployment of economic activities. Such deployment can lead to an over-representation of specific economic sectors in a given city, and poses a significant thread for the city's future especially in times when the over-represented activities face economic uncertainties. If we compare our analysis with external rankings about the quality of life in a city, we find that the nested structure of the city-firm network also reflects such information about the quality of life, which can usually be assessed only via dedicated survey-based indicators.
    Date: 2015–12
  10. By: Carlo Drago (“Niccolò Cusano” University); Roberto Ricciuti (University of Verona and CESifo); Paolo Santella (ESMA)
    Abstract: The purpose of this paper is to analyze the effects on the Italian directorship network of the corporate governance reform that was introduced in Italy in 2011 to prevent interlocking directorships in the financial sector. Interlocking directorships are important communication channels among companies and may have anticompetitive effect. We apply community detection techniques to the analysis of the networks in 2009 and 2012 to ascertain the effect of the reform. We find that, although the number of interlocking directorships decreases in 2012, the reduction takes place mainly at the periphery of the network whereas the network core is stable, allowing the most connected companies to keep their strategic position.
    Keywords: Interlocking Directorships, Corporate Governance, Community Detection, Social Networks
    JEL: C33 G34 G38 L14
    Date: 2015–10
  11. By: Diego Cerdeiro (The International Monetary Fund); Marcin Dziubinski (Warsaw University); Sanjeev Goyal (University of Cambridge)
    Abstract: Individuals derive benefits from their connections, but these may, at the same time, transmit external threats. Individuals therefore invest in security to protect themselves. However, the incentives to invest in security depend on their network exposures. We study the problem of designing a network that provides the right individual incentives. Motivated by cybersecurity, we first study the situation where the threat to the network comes from an intelligent adversary. We show that, by choosing the right topology, the designer can bound the welfare costs of decentralized protection. Both over-investment as well as under-investment can occur depending on the costs of security. At low costs, over-protection is important: this is addressed by disconnecting the network into two unequal components and sacrificing some nodes. At high costs, under-protection becomes salient: it is addressed by disconnecting the network into equal components. Motivated by epidemiology, we then turn to the study of random attacks. The over-protection problem is no longer present, whereas under-protection problems is mitigated in a diametrically opposite way: namely, by creating dense networks that expose the individuals to the risk of contagion.
    Keywords: Cybersecurity, Epidemics, Security choice, Externalities
    JEL: D82 D85
    Date: 2015–06

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