nep-net New Economics Papers
on Network Economics
Issue of 2016‒02‒12
eleven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Commercial platforms with heterogeneous participants By Gabriel Garber; Márcio Issao Nakane
  2. Bank networks from text: interrelations, centrality and determinants By Rönnqvist, Samuel; Sarlin, Peter
  3. Pricing in the Norwegian interbank market – the effects of liquidity and implicit government support By Q. Farooq Akram; Casper Christophersen
  4. « Can a Platform Make Profit with Consumers' Mobility? A Two-Sided Monopoly Model with Random Endogenous Side-Switching » By Pierre Andreoletti; Pierre Gazé; Maxime Menuet
  5. Evidence That Calls-Based and Mobility Networks Are Isomorphic By Coscia, Michele; Hausmann, Ricardo
  6. Review of International Production and Global Value Chain Studies: the Case of Turkish Regional Networks By Erkan Erdil; H. Tolga Göksidan
  7. Optimal Monetary Provisions and Risk Aversion in Plural Form Franchise Networks A Model of Incentives with Heterogeneous Agents By Muriel Fadairo; Cintya Lanchimba; Miguel Yangari
  8. Note on the Common Enemy Effect under Strategic Network Formation and Disruption By Hans Haller; Britta Hoyer
  9. Should dark PoolS be banned from regulated exchangeS? By Nathalie Oriol; Alexandra Rufini; Dominique Torre
  10. Network Vulnerability: A Designer-Disruptor Game By Hans Haller
  11. Discovering SIFIs in interbank communities By Nicolò Pecora; Alessandro Spelta

  1. By: Gabriel Garber; Márcio Issao Nakane
    Abstract: We study two-sided markets where there are buyers and sellers, with heterogeneous participants on each side. Buyers care about the quality of the good purchased, but sellers care only about the price they get. When there is informational asymmetry about types between the sides, the role of a platform as a certifier that guarantees a minimum quality becomes central to the transactions. We analyze first-best (perfect information) and pooling equilibria without platforms and a monopolist platform that coexists with an external pooling. We also show there is no equilibrium in a simultaneous game with two platforms.
    Keywords: Platforms; two-sided markets; heterogeneous agents; certification.
    JEL: D42 D43 D82 D85 L12 L13 L15 L81
    Date: 2016–01–29
  2. By: Rönnqvist, Samuel; Sarlin, Peter
    Abstract: In the wake of the still ongoing global financial crisis, bank interdependencies have come into focus in trying to assess linkages among banks and systemic risk. To date, such analysis has largely been based on numerical data. By contrast, this study attempts to gain further insight into bank interconnections by tapping into financial discourse. We present a text-to-network process, which has its basis in co-occurrences of bank names and can be analyzed quantitatively and visualized. To quantify bank importance, we propose an information centrality measure to rank and assess trends of bank centrality in discussion. For qualitative assessment of bank networks, we put forward a visual, interactive interface for better illustrating network structures. We illustrate the text-based approach on European Large and Complex Banking Groups (LCBGs) during the ongoing financial crisis by quantifying bank interrelations and centrality from discussion in 3M news articles, spanning 2007Q1 to 2014Q3. JEL Classification: E
    Keywords: bank networks, information centrality, systemic risk, text analysis
    Date: 2016–01
  3. By: Q. Farooq Akram (Norges Bank (Central Bank of Norway)); Casper Christophersen (European Insurance and Occupational Pensions Authority (EIOPA) and Norges Bank (Central Bank of Norway))
    Abstract: We investigate the effects of central bank liquidity and possible implicit government guarantees against default on Norwegian overnight interbank interest rates. We conduct an econometric study of these interest rates over the period 2006-2009, which includes the sharp fall in interbank trading during the financial crisis. Our findings suggest relatively lower funding costs for banks of systemic importance, particularly for banks with many and valuable linkages to other banks. Moreover, interest rates are found to depend not only on overall liquidity in the interbank market, but on its distribution among banks as well. There is also evidence of stronger effects on interest rates of systemic importance, creditworthiness and liquidity demand and supply factors during the financial crisis.
    Keywords: Interbank money market, Interest rates, Systemic importance
    JEL: G21 E43 E58
    Date: 2015–02–01
  4. By: Pierre Andreoletti (MAPMO - Mathématiques - Analyse, Probabilités, Modélisation - Orléans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique); Pierre Gazé (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans); Maxime Menuet (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans)
    Abstract: We model a specific two-sided monopoly market in which agents can switch from a side to the other. We define two periods of time. In the first period, agents buy the platform services on each side and in the second period of time, they can possibly enhance their satisfaction by going to the other face of the platform. We analyze the link between mobility, consumer’s utility, prices and profit. We show that mobility is a valuable feature which can be compared with an increase of product quality. Finally, the firm is able to capture the mobility in its monopoly’s profit. The relative size of each group then appears as a strategical variable for the firm.
    Keywords: externalities, side-switching, two-sided markets
    Date: 2016–01–06
  5. By: Coscia, Michele; Hausmann, Ricardo
    Abstract: Social relations involve both face-to-face interaction as well as telecommunications. We can observe the geography of phone calls and of the mobility of cell phones in space. These two phenomena can be described as networks of connections between different points in space. We use a dataset that includes billions of phone calls made in Colombia during a six-month period. We draw the two networks and find that the call-based network resembles a higher order aggregation of the mobility network and that both are isomorphic except for a higher spatial decay coefficient of the mobility network relative to the call-based network: when we discount distance effects on the call connections with the same decay observed for mobility connections, the two networks are virtually indistinguishable.
    Date: 2015
  6. By: Erkan Erdil (TEKPOL, Science and Technology Policy Studies, Middle East Technical University); H. Tolga Göksidan
    Abstract: This study focuses on how Turkey’s small and medium-sized enterprises (SMEs) can participate in global markets. In fact, developing countries provide a means for accelerating the development of enterprises and countries, providing openings that developing country enterprises can exploit to upgrade their capabilities. For such enterprises, or local clusters of enterprises, the task is to insert themselves into the wider networks. This may be regarded as the main achievement for sustaining competitiveness, in similarities with the re-structuring of regional networks in developing countries that often compete by participating in extensive inter-firm networks. As another dimension in our study, we will investigate and argue whether if it is possible to increase and improve the participation of Turkish’s SMEs in the global economy, which is explicitly the baseline hypothesis of this study. The literature on regional networks and global value chain (GVC) will provide us some new insights to show the international linkages of Turkish SMEs, which often lack the capabilities to participate effectively in global markets.
    Keywords: Global Value Chains, GVC, Turkey, regional networks
    Date: 2015–12
  7. By: Muriel Fadairo (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Cintya Lanchimba (Escuela Politécnica Nacional, Quito, GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Miguel Yangari (Escuela Politécnica Nacional, Quito)
    Abstract: Existing literature on franchising has extensively studied the presence of plural form distribution networks, where two types of vertical relationships-integration versus franchising-co-exist. However, despite the importance of monetary provisions in franchise contracts, their definition in the case of plural form networks had not been addressed. In this paper, we focus more precisely on the " share parameters " in integrated (company-owned retail outlet) and decentralized (franchised outlet) vertical contracts, respectively the commission rate and the royalty rate. We develop an agency model of payment mechanism in a two-sided moral hazard context, with one principal and two heterogenous agents distinguished by different levels of risk aversion. We define the optimal monetary provisions, and demonstrate that even in the case of segmented markets, with no correlation between demand shocks, the two rates (commission rate, royalty rate) are negatively interrelated.
    Keywords: moral hazard, commission rate, dual distribution, royalty rate,Franchising
    Date: 2016
  8. By: Hans Haller; Britta Hoyer
    Abstract: Social psychology studies the “common enemy effectâ€, the phenomenon that members of a group work together when they face an opponent, although they otherwise have little in common. An interesting scenario is the formation of an information network where group members individually sponsor costly links. Suppose that ceteris paribus, an outsider appears who aims to disrupt the information flow within the network by deleting some of the links. The question is how the group responds to this common enemy. We address this question for the homogeneous connections model of strategic network formation, with two-way flow of information and without information decay. For sufficiently low linkage costs, the external threat can lead to a more connected network, a positive common enemy effect. For very high but not prohibitively high linkage costs, the equilibrium network can be minimally connected and efficient in the absence of the external threat whereas it is always empty and inefficient in the presence of the external threat, a negative common enemy effect.
    Keywords: strategic network formation, strategic network disruption, common enemy effect.
    Date: 2015
  9. By: Nathalie Oriol (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis); Alexandra Rufini (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis); Dominique Torre (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis)
    Abstract: European financial markets experiment a strong competition between historical players and new trading platforms, including the controversial dark pools. Our theoretical setting analyzes the interaction between heterogeneous investors and trading services providers in presence of market externalities. We compare different forms of organization of the market, each in presence of an off-exchange and an incumbent facing a two-sided activity (issuers and investors): a consolidated exchange with the incum- bent only, and fragmented exchanges with several platforms, including lit and dark pools, in competition for order ows. By capturing investors from off-exchange, dark trading may enhance market externalities and market stakeholders' welfare.
    Keywords: Microstructure, dark pools , Over-The-Counter market, liquidity, market externalities, two-sided markets
    Date: 2016–01–12
  10. By: Hans Haller
    Abstract: We focus on the crucial role of network architecture in the defence against targeted attacks. A two-stage strategic game between a network designer and a network disruptor is analyzed. Given a set of nodes, the designer builds a network by investing in costly links. In the second stage, the disruptor deletes (possibly in a costly way) some of the links or nodes to reduce the designer’s benefit from the network. General results deal with existence, uniqueness and comparative statics of Stackelberg (i.e., subgame perfect) equilibria. More specific issues are addressed under the assumption of a fixed budget for one or both players.
    Keywords: strategic network disruption, strategic network design, strategic network games.
    Date: 2015
  11. By: Nicolò Pecora; Alessandro Spelta (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: This paper proposes a new methodology based on non-negative matrix factor- ization to detect communities and to identify Systemically Important Financial In- stitutions in the interbank network as well as within communities. The method is speci…cally designed for directed weighted networks and it is able to take into account exposures on both sides of banksbalance sheets, distinguishing between Systemically Important Borrowers and Lenders. Using interbank transactions data from the e-Mid platform, we show that the systemic importance associated with Italian banks decreased during the 2007-2009 …nancial crisis while the opposite happened for foreign institutions. We also show that, as the transactions volume grew, the number of communities rose as well. The contrary happened during the crisis phase. Moreover results indicate that, during …nancial crisis, banks strongly operate into non overlapping communities with few institutions playing the role of SIFIs. On the contrary during business as usual times banks act in several and overlapping modules.
    Keywords: Financial networks, community detection, systemic risk.
    JEL: D8 L14 C02

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