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on Network Economics |
| By: | Edoardo Gallo; Chang Yan; ; |
| Abstract: | The tension between efficiency and equilibrium is a central feature of economic systems. In many contexts, social networks mediate this trade-off: an individual's network position determines equilibrium play, and social relations allow coordination on an efficient norm. We examine this trade-o in a network game with a unique Nash equilibrium, but such that agents can achieve a higher payoff by following a "collaborative norm". Subjects establish and maintain a collaborative norm in the circle, but the norm weakens with the introduction of one asymmetric node in the wheel. In complex and asymmetric networks of 15 and 21 nodes, the norm disappears and subjects' play converges to Nash on every node. We provide evidence that subjects base their decisions on their degree, rather than the overall network structure. Methodologically, the paper shows the capabilities of UbiquityLab: a novel platform to conduct interactive experiments online with a large number of participants. |
| Keywords: | network, online experiment, network game, strategic complements. |
| JEL: | C99 D03 D85 Z13 |
| Date: | 2015–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1546&r=net |
| By: | Matteo Barigozzi; Marc Hallin |
| Abstract: | In this paper, we define weighted directed networks for large panels of financial time series wherethe edges and the associated weights are reflecting the dynamic conditional correlation structureof the panel. Those networks produce a most informative picture of the interconnections amongthe various series in the panel. In particular, we are combining this network-based analysis and ageneral 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 panelinto 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 systematic components ofrisk, the idiosyncratic components show important interdependencies which are nicely describedthrough network structures. Those networks shed some light on the contagion phenomenons associatedwith financial crises, and help assessing how systemic a given firm is likely to be. We showhow 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 mostinterconnected ones. In particular, the Financials stocks appear to be the most central vertices inthe network, making them the main source of contagion. |
| Keywords: | Time Series; Dynamic Factor Models; Network Analysis; Volatility; Systemic Risk |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/218748&r=net |
| By: | Roberta Dessi; Edoardo Gallo; Sanjeev Goyal; |
| Abstract: | We study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit three main cognitive biases: (i) they underestimate the mean degree compared to the actual network; (ii) they overestimate the number of rare degrees; (iii) they underestimate the number of frequent degrees. We then analyse survey data from two `real' friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases. The experiments yield three further: findings: (iv) network cognition is a affected by the subject's location, (v) the accuracy of network cognition varies with the nature of the network, and (vi) network cognition has a significant effect on economic decisions. |
| Date: | 2014–08–27 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1462&r=net |
| By: | Damien Besancenot (CEPN and University Paris 13, Sorbonne Paris Cité); Kim Huynh (LEM and University Panthéon-Assas, Paris 2); Francisco Serranito (Université Orléans, CNRS, LEO, UMR 7322 and IRD, LEDa, DIAL UMR 225) |
| Abstract: | This paper estimates the relation between the size and quality of scientists’ co-author networks and individual characteristics (notably productivity) in the context of institutional changes in French academia in the mid-1980s. The analysis employs the Two-Stage Residual Inclusion (2SRI) framework to handle endogeneity in individual productivity relative to the quality of co-authors. Data is taken from a novel database of French academic economists. The main finding is that the size and quality of authors’ networks are positively related to their productivity; this is understood as evidence of assortative matching. Other effects on coauthor networks (life-cycles, specialities) are also identified. |
| Keywords: | Co-authorship, Count Data, Zero Inflate Models, Instrumental Variables, h index |
| JEL: | A14 C25 D83 I23 J24 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201602&r=net |
| By: | Sanjeev Goyal; Stephanie Rosenkranz; Utz Weitze; Vincent Buskens |
| Abstract: | A central feature of social networks is information sharing. The Internet and related computing technologies define the relative costs of private information acquisition and forming links with others. This paper presents an experiment on the effects of changing costs.We find that a decline in relative costs of linking makes private investments more dispersed and gives rise to denser social networks. Aggregate investment falls, but individuals access to investment remains stable, due to increased networking. The overall effect is a significant increase in individual utility and aggregate welfare. |
| Date: | 2015–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1566&r=net |
| By: | Russell Barker; Andrew Dickinson; Alex Lipton; Rajeev Virmani |
| Abstract: | We propose a model for the credit and liquidity risks faced by clearing members of Central Counterparty Clearing houses (CCPs). This model aims to capture the features of: gap risk; feedback between clearing member default, market volatility and margining requirements; the different risks faced by various types of market participant and the changes in margining requirements a clearing member faces as the system evolves. By considering the entire network of CCPs and clearing members, we investigate the distribution of losses to default fund contributions and contingent liquidity requirements for each clearing member; further, we identify wrong-way risks between defaults of clearing members and market turbulence. |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1604.00254&r=net |
| By: | Syngjoo Choi; Andrea Galeotti; Sanjeev Goyal; |
| Abstract: | We propose a model of posted prices in networks. The model maps traditional concepts of market power, competition and double marginalization into networks, allowing for the study of pricing in complex structures of intermediation such as supply chains, transportation and communication networks and financial brokerage. We provide a complete characterization of equilibrium prices. Our experiments complement our theoretical work and point to node criticality as an organizing principle for understanding pricing, efficiency and the division of surplus in networked markets. |
| Keywords: | Intermediation, competition, market power, double marginalization. |
| JEL: | C70 C71 C91 C92 D40 |
| Date: | 2014–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1457&r=net |