nep-net New Economics Papers
on Network Economics
Issue of 2015‒12‒20
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Privacy, trust and social network formation By Gaudeul, Alexia; Giannetti, Caterina
  2. A network-based analysis of the European Emission Market By Andreas Karpf; Antoine Mandel; Stefano Battiston
  3. In Gov we trust: Voluntary compliance in networked investment games By Natalia Borzino; Enrique Fatas; Emmanuel Peterle
  4. Emergence of networks and market institutions in a large virtual economy By Kephart, Curtis; Friedman, Daniel; Baumer, Matt
  5. Network centrality and pension fund performance By Rossi, Alberto G.; Blake, David; Timmermann, Allan; Tonks, Ian; Wermers, Russ
  6. Bad Company: Reconciling Negative Peer Effects in College Achievement By Brady, Ryan; Insler, Michael; Rahman, Ahmed
  7. The impact of group identity on coalition formation By Denise Laroze; David Hugh-Jones; Arndt Leininger

  1. By: Gaudeul, Alexia; Giannetti, Caterina
    Abstract: We study in the laboratory the impact of private information revelation on the selection of partners when forming individual networks. Our experiment combines a "network game" and a "public-good game". In the network game, individuals decide with whom to form a link with, while in the public-good game they decide whether or not to contribute. The variations in our treatments allow us to identify the effect of revealing one´s name on the probability of link formation. Our main result suggests that privacy mechanisms affect partner selection and the consequent structure of the network: when individuals reveal their real name, their individual networks are smaller but their profits are higher. This indicates that the privacy costs of revealing personal information are compensated by more productive links.
    Keywords: privacy,social networks,public goods,trust
    JEL: D12 D85
    Date: 2015
  2. By: Andreas Karpf (Centre d'Economie de la Sorbonne - Paris School of Economics); Antoine Mandel (Paris School of Economics - Centre d'Economie de la Sorbonne); Stefano Battiston (University of Zurich - Department of Banking and Finance)
    Abstract: This paper analyses the European Emission Trading System (ETS) from a network perspective. It is shown that the network exhibits a strong core-periphery structure also reflected in the network formation process. Due to a lack of centralized market places, operators of installations which fall under the EU ETS regulations have to resort to local networks or financial intermediaries if they want to participate in the market. This undermines the central idea of the ETS to exploit marginal abatement costs
    Keywords: network; emission market; ETS; network topology
    JEL: L14 D85 Q56
    Date: 2015–11
  3. By: Natalia Borzino (University of East Anglia); Enrique Fatas (University of East Anglia); Emmanuel Peterle (University of Gottingen)
    Abstract: We conduct a controlled laboratory experiment to investigate trust and trustworthiness in a networked investment game in which two senders interact with a receiver. We investigate to what extent senders and receivers comply with an exogenous and non-binding recommendation. We also manipulate the level of information available to senders regarding receiver’s behavior in the network. We compare a baseline treatment in which senders are only informed about the actions and outcomes of their own investment games to two information treatments. In the reputation treatment, senders receive ex ante information regarding the average amount returned by the receiver in the previous period. In the transparency treatment, each sender receives ex post additional information regarding the returning decision of the receiver to the other sender in the network. Across all treatments and for both senders and receivers, the non-binding rule has a significant and positive impact on individual decisions. Providing senders with additional information regarding receiver’s behavior affects trust at the individual level, but leads to mixed results at the aggregate level. Our findings suggest that reputation building, as well as allowing for social comparison could be efficient ways for receivers to improve trust within networks.
    Date: 2015–12
  4. By: Kephart, Curtis; Friedman, Daniel; Baumer, Matt
    Abstract: A complete set of transactions, more than 40 million within a 1.8 year span, allows us to track the evolution of the trader network and the goods network in an on-line trading community. The computer platform was designed to make barter exchange as attractive as possible; money was not part of the design and all players were created equal. Yet, within weeks, several specific goods began to emerge as media of exchange, and not long after that various sorts of specialized traders began to appear. We track their progress using network-theoretic metrics such as node strength, assortativity, betweenness and closeness. By the end of our sample, virtually all trade was money-mediated and market makers played a major role.
    Keywords: Multiple Money as Medium of Exchange,Market Makers,Virtual Economy,Market Efficiency,Network Analysis
    JEL: B41 C45 D49 E42
    Date: 2015
  5. By: Rossi, Alberto G.; Blake, David; Timmermann, Allan; Tonks, Ian; Wermers, Russ
    Abstract: We analyze the relation between the location of a pension fund in its network and the investment performance, risk taking, and flows of the fund. Our approach analyzes the centrality of the fund's management company by examining the number of connections it has with other management companies through their commonality in managing for the same fund sponsors or through the same fund consultants. Network centrality is found to be positively associated with risk-adjusted return performance and growth in assets under management, after controlling for size and past performance, for domestic asset classes; however, we do not find this relation for foreign equity holdings. These findings indicate that local information advantages, which are much stronger among managers holding locally based stocks, exhibit positive externalities among connected managers. Of particular note is that we do not find that the centrality of a manager within one asset class (e.g., domestic bonds) helps the performance of the manager in another asset class (e.g., domestic equity), further indicating that our network analysis uncovers information diffusion effects. Network connections established through consultants are found to be particularly significant in explaining performance and fund flows, consistent with consultants acting as an important information conduit through which managers learn about each other's actions. Moreover, the importance of network centrality is strongest for larger funds, controlling for any economic scale effects. Better connected funds are also better able to attract higher net inflows for a given level of past return performance. Finally, more centrally placed fund managers are less likely to be fired after spells of low performance. Our results indicate that networks in asset management are one key source of the dissemination of private information about security values.
    Date: 2015
  6. By: Brady, Ryan; Insler, Michael; Rahman, Ahmed
    Abstract: Existing peer effects studies produce contradictory findings, including positive, negative, large, and small effects, despite similar contexts. We reconcile these results using U.S. Naval Academy data covering a 22-year history of the random assignment of students to peer groups. Coupled with students' limited discretion over freshman-year courses, our setting affords an opportunity to better understand peer effects in different social networks. We find negative effects at the broader "company" level (students' social and residential group) and positive effects at the narrower course-company level. We suggest that peer spillovers change direction because of differences in the underlying mechanism of peer influence.
    Keywords: Peer effects, social network formation, academic achievement, homophily
    JEL: D85 I21 I23 J24
    Date: 2015–11
  7. By: Denise Laroze (University of Essex); David Hugh-Jones (University of East Anglia); Arndt Leininger (Hertie School of Governance)
    Abstract: Bargaining and coalition building is a central part of modern politics. Typically, game-theoretic models cannot predict a unique equilibrium. One possibility is that coalitions are formed on the basis of social identity loyalty to a gender, ethnic or political in-group. We test the effect of gender, race and ideological distance on coalition formation in a majority-rule bargaining experiment. Despite the absence of any incentives to do so, we find that ideological distance significantly affects offers made to potential coalition partners. As a result, coalitions tend to be ideologically coherent, even though there is no ideological policy output. We conclude that social identity considerations can determine equilibria in coalition formation.
    Keywords: coalition formation, laboratory experiments, Baron and Ferejon model, legislative bargaining, social identity
    Date: 2015–09–03

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