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on Network Economics |
| By: | Andrew B. BERNARD; Andreas MOXNES; Karen Helene ULLTVEIT-MOE |
| Abstract: | This paper develops a multi-country model of international trade that provides a simple micro-foundation for buyer-seller relationships in trade. We explore a rich dataset that identifies buyers and sellers in trade and establish a set of basic facts that guide the development of the theoretical model. We use predictions of the model to examine the role of buyer heterogeneity in a market for firm-level adjustments to trade shocks, as well as to quantitatively evaluate how firms' marginal costs depend on access to suppliers in foreign markets. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:16047&r=net |
| By: | Rui Gong; Frank Page |
| Abstract: | We construct a model of a principal-agent game of network formation (over layered networks) with asymmetric information and we consider the following two questions: (1) Is it possible for the principal to design a mechanism that links the reports of agents about their private information and the set of connections allowed and recommended by the principal via the mechanism in such a way that players truthfully reveal their private information to the principal and follow the recommendations specified by the mechanism. (2) An even more fundamental question we address is whether or not it is possible for the principal to achieve the same outcome (as that achieved via a mechanism and centralized reporting) by instead choosing a profile of sets of allowable ways to connect (here modeled as player—club specific sets - or catalogs - of networks) and then delegating connection choices to each pair of agents. We call this approach to network formation with incomplete information delegated networking and we show, under relatively mild conditions on our game-theoretic model of network formation, that strategic network formation with incomplete information, implemented via a mechanism and centralized reporting, is equivalent to implementation via delegated networking with monitoring. |
| Keywords: | Incentive compatible multilayered networks; delegated networking principle; delegation principle; bilateral incentive compatibility; mechanism design; catalog games |
| JEL: | J1 F3 G3 |
| Date: | 2016–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:66045&r=net |
| By: | Biglaiser, Gary; Crémer, Jacques |
| Abstract: | We study the dynamics of competition in a model with network effects, an incumbent and entry. We propose a new way of representing the strategic advantages of incumbency in a static model. We then embed this static analysis in a dynamic framework with heterogeneous consumers. We completely identify the conditions under which inefficient equilibria with two platforms will emerge at equilibrium; explore the reasons why these inefficient equilibria arise; and compute the profits of the incumbent when there is only one platform at equilibrium. |
| Keywords: | network effects; network externalities; plaforms |
| JEL: | L12 L13 L86 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11207&r=net |
| By: | Anna Lou Abatayo (University of Hawaii at Manoa); John Lynham (University of Hawaii at Manoa); Katerina Sherstyuk (University of Hawaii at Manoa) |
| Abstract: | Communication is often critical for economic cooperation and enhancement of trust. Traditionally, direct face-to-face communication has been found to be more effective than any form of indirect, mediated communication. We study whether this is still the case given that many people routinely use texting and online social media to conduct economic transactions. In out laboratory experiment, groups of participants communicate either (i) face-to-face, (ii) through the most popular online social network – Facebook, or (iii) using text messaging, before participating in a public goods or a trust game. While people talk significantly more under traditional face-to-face, discussion through Facebook and text messages prove as effective as face-to-face communication in enhancing cooperation and increasing trust. For all three media, discussions that focus on the game of use more positive emotion words are correlated with enhanced trust. It appears that young American adults are now just as adept at communicating and reducing social distance online as they are in person. |
| Keywords: | communication technology; laboratory experiments; public good games; trust games |
| JEL: | C91 C92 D03 D71 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:hae:wpaper:2015-9&r=net |
| By: | Richard Frenscha (Department of Economics, University of Regensburg); Jan Hanousekb (CERGE-EI, Charles University); Evzen Kocenda (Institute of Economic Studies, Charles University) |
| Abstract: | Based on the factor-proportion gravity framework we build a model that identifies driving forces for trade in parts and components. We test our model empirically by using a detailed and large European data set. We show that trade in parts and components is driven by relative supply-side country differences, proxied by wages and capital labor ratios. The pattern is compatible with models of incomplete specialization and trade. We take our results as evidence for the existence of international East-West production networks in Europe, driven by trade-offs between wages, capital labor ratios and coordination costs. Our results also reveal that (i) in response to stronger relative wage differences trade in parts and components across Europe is predominantly realized along the extensive margin but (ii) potential to intensify the trade and international production network in new EU members is not exhausted yet. |
| Keywords: | International trade, production networks, gravity model, panel data, European Union |
| JEL: | C23 F14 F23 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:939&r=net |
| By: | Quoc-Anh Do (Département d'économie); Yen-Teik Lee (Singapore Management University); Bang Dang Nguyen (University of Cambridge) |
| Abstract: | The external networks of directors significantly impact firm value and decisions. Surrounding close gubernatorial elections, local firms with directors connected to winners increase value by 4.1% over firms connected to losers. Director network’s value increases with network strength and activities, and is not due to network homophily. Connected firms are more likely to receive state subsidies, loans, and tax credits. They obtain better access to bank loans, borrow more, pay lower interest, invest and employ more, and enjoy better long-term performance. Network benefits are concentrated on connected firms, possibly through quid pro quo deals, and unlikely spread to industry competitors. |
| Keywords: | External Networks of Directors; Board of Directors; Connectors; Regression Discontinuity Design; Close Gubernatorial Election |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/5q8d3q8agf8hdbs42laqdfujkb&r=net |
| By: | Jean-François Caulier (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Ana Mauleon (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CEREC - Université Saint-Louis - Bruxelles); Vincent Vannetelbosch (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CEREC - Université Saint-Louis - Bruxelles) |
| Abstract: | Coalitional network games are real-valued functions defined on a set of players organized into a network and a coalition structure. We adopt a flexible approach assuming that players organize themselves the best way possible by forming the efficient coalitional network structure. We propose two allocation rules that distribute the value of the efficient coalitional network structure: the atom-based flexible coalitional network allocation rule and the player-based flexible coalitional network allocation rule. |
| Keywords: | cooperative game theory, allocation rules,Coalition, Networks |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-01301981&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: | Andrew B. BERNARD; Andreas MOXNES; SAITO Yukiko |
| Abstract: | This paper examines the importance of buyer-supplier relationships, geography, and the structure of the production network in firm performance. We develop a simple model where firms can outsource tasks and search for suppliers in different locations. Low search and outsourcing costs lead firms to search more and find better suppliers. This in turn drives down firms' marginal production costs. We test the theory by exploiting the opening of a high-speed train line (shinkansen) in Japan which lowered the cost of passenger travel but left shipping costs unchanged. Using an exhaustive dataset on firms' buyer-seller linkages, we find significant improvements in firm performance as well as creation of new buyer-seller links, which are consistent with the model. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:16055&r=net |
| By: | Halaburda, Hanna; Jullien, Bruno; Yehezkel, Yaron |
| Abstract: | We consider dynamic competition among platforms in a market with network externalities. A platform that dominated the market in the previous period becomes "focal"; in the current period, in that agents play the equilibrium in which they adopt the focal platform whenever such equilibrium exists. Yet when faced with higher-quality competition, can a low-quality platform remain focal? In the finite-horizon case, the unique equilibrium is efficient for "patient" platforms; with an infinite time horizon, however, there are multiple equilibria where either the low- or high-quality platform dominates. If qualities are stochastic, the platform with a better average quality wins with a higher probability, even when its realized quality is lower, and this probability increases as platforms become more patient. Hence social welfare may decline as platforms become more forward looking. |
| Keywords: | coordination; dynamic competition; network externalities |
| JEL: | L1 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11205&r=net |
| By: | Doan, Quang Hung; Vu, Hoang Nam |
| Abstract: | By using the latest dataset from the survey of SMEs conducted in Vietnam in 2011, we show that a firm both participating in a wider network of input suppliers, buyers, and associations of enterprises and conducting innovative activities in production has higher labor productivity than others, implying that networks of enterprises and innovation are complementary to each other in affecting performance of SMEs in Vietnam. We also find that supports of the government including providing better infrastructure to the SMEs and helping the SMEs to be formalized when being established are conducive to the development of the SMEs in Vietnam. |
| Keywords: | Complementary, supermodularity, Network, Innovation, SMEs. |
| JEL: | D58 O3 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:70591&r=net |
| By: | Zhi Da; Borja Larrain; Clemens Sialm; José Tessada |
| Abstract: | We document a novel channel through which coordinated noise trading exerts externalities on financial markets dominated by institutional investors. We exploit a unique set of events where Chilean pension fund investors followed an influential financial advisory firm that recommended frequent switches between equity and bond funds. The recommendations, which mostly followed short-term trends, generated large and coordinated fund flows. These flows resulted in substantial price pressure and increased volatility in financial markets. Pension funds increased cash holdings as a response. Our findings suggest that giving retirement savers unconstrained reallocation opportunities may exert negative externalities on financial markets. |
| JEL: | F32 G02 G11 G12 G14 G15 G18 G23 G28 H31 H55 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22161&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: | Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Muhamed Kudic (Stifterverband für die Deutsche Wissenschaft, Wissenschaftsstatistik, Essen) |
| Abstract: | The emergence and solidification of network patterns is typically explained by the preferential attachment rule. The underlying logic is that a small number of actors which are characterized by an above average degree attract links at a higher rate than others. We raise the question as to what extent the wide spread preferential attachment explanation holds true in the context of inventor networks. To shed some light on this issue we investigate co-patenting relationships among inventors in the field of laser technology in West Germany from 1961 to 2005. From a system perspective, the development of the inventor networks is in line with the pattern that is implied by the preferential attachment logic. However, we find high levels of fluidity of micro-level relationships that put the typical transaction cost and trust-based explanation of tie formation processes into question. |
| Keywords: | Preferential attachment, inventor networks, system stability, micro-level instability, laser industry |
| JEL: | O3 R1 L6 D2 D8 |
| Date: | 2016–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2016-005&r=net |