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on Network Economics |
| By: | Hamed AMINI (Ecole Polytechnique Fédérale de Lausanne); Damir FILIPOVIC (Ecole Polytechnique Fédérale de Lausanne and Swiss Finance Institute); Andreea MINCA (Cornell University) |
| Abstract: | We study a financial network where forced liquidations of an illiquid asset have a negative impact on its price, thus reinforcing network contagion. We prove uniqueness of the clearing asset price and liability payments under no, partial, and full multilateral netting of interbank liabilities. We show that partial versus full multilateral netting increases bank shortfall, and reduces clearing asset price and aggregate bank surplus. We also show that partial multilateral netting can be worse than no netting at all. |
| Keywords: | Over the Counter Markets, Financial Network, Partial Multilateral Netting |
| JEL: | C44 C54 C62 G01 G18 G32 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1463&r=net |
| By: | Antoci, Angelo; Delfino, Alexia; Paglieri, Fabio; Panebianco, Fabrizio; Sabatini, Fabio |
| Abstract: | Evidence is growing that forms of incivility –e.g. aggressive and disrespectful behaviors, harassment, hate speech and outrageous claims– are spreading in the population of social networking sites’ (SNS) users. Online social networks such as Facebook allow users to regularly interact with known and unknown others, who can behave either politely or rudely. This leads individuals not only to learn and adopt successful strategies for using the site, but also to condition their own behavior on that of others. Using a mean field approach, we define an evolutionary game framework to analyse the dynamics of civil and uncivil ways of interaction in online social networks and their consequences for collective welfare. Agents can choose to interact with others –politely or rudely– in SNS, or to opt out from online social networks to protect themselves from incivility. We find that, when the initial share of the population of polite users reaches a critical level, civility becomes generalized if its payoff increases more than that of incivility with the spreading of politeness in online interactions. Otherwise, the spreading of self-protective behaviors to cope with online incivility can lead the economy to non-socially optimal stationary states. |
| Keywords: | online incivility; evolutionary dynamics; self-protective behavior; social networks; dynamics of social interaction; social networking sites; Internet. |
| JEL: | C61 C63 D85 O3 O33 Z13 |
| Date: | 2016–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:72454&r=net |
| By: | Kiran Sharma; Shreyansh Shah; Anindya S. Chakrabarti; Anirban Chakraborti |
| Abstract: | In this article we review several techniques to extract information from stock market data. We discuss recurrence analysis of time series, decomposition of aggregate correlation matrices to study co-movements in financial data, stock level partial correlations with market indices, multidimensional scaling and minimum spanning tree. We apply these techniques to daily return time series from the Indian stock market. The analysis allows us to construct networks based on correlation matrices of individual stocks in one hand and on the other, we discuss dynamics of market indices. Thus both micro level and macro level dynamics can be analyzed using such tools. We use the multi-dimensional scaling methods to visualize the sectoral structure of the stock market, and analyze the comovements among the sectoral stocks. Finally, we construct a mesoscopic network based on sectoral indices. Minimum spanning tree technique is seen to be extremely useful in order to separate technologically related sectors and the mapping corresponds to actual production relationship to a reasonable extent. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1607.05514&r=net |
| By: | Dan LI (Federal Reserve Board); Norman SCHUERHOFF (University of Lausanne and Swiss Finance Institute and CEPR) |
| Abstract: | Dealers in over-the-counter securities form networks to mitigate search frictions. The audit trail for municipal bonds shows the dealer network has a core-periphery structure. Central dealers are more efficient at matching buyers and sellers than peripheral dealers, which shortens intermediation chains and speeds up trading. Investors face a tradeoff between execution speed and cost. Central dealers provide immediacy by pre-arranging fewer trades and holding larger inventory. However, trading costs increase strongly with dealer centrality. Investors with strong liquidity need trade with central dealers and at times of market-wide illiquidity. Central dealers thus serve as liquidity providers of last resort. |
| Keywords: | Municipal bonds, over-the-counter financial market, trading cost, liquidity, immediacy, transparency, decentralization, market quality, network analysis |
| JEL: | G12 G14 G24 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1450&r=net |
| By: | Michael Weber (University of Chicago); Ali Ozdagli (Federal Reserve Bank of Boston) |
| Abstract: | Monetary policy shocks have a large impact on aggregate stock market returns in narrow event windows around press releases by the Federal Open Market Committee. A one percentage point higher than expected Federal Funds rate leads to a drop in the stock market by 4 percentage points within a 30 minutes event window. We decompose the overall event into a direct (demand) effect and an indirect (network) effect using spatial autoregressions. We use the empirical input-output structure from the Bureau of Economic Analysis to construct a spatial-weighting matrix. We attribute 50% to 85% of the overall effect to indirect effects. The effect is robust to different sample periods, event windows, type of announcements, and is symmetric in the shock sign. We rationalize our findings in a simple model with intermediate inputs. Our findings indicate that production networks might not only be important for the propagation of idiosyncratic shocks but might also be a propagation mechanism of monetary policy to the real economy. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed016:148&r=net |
| By: | Jana Bielagk; Ulrich Horst; Santiago Moreno--Bromberg |
| Abstract: | We use a principal-agent model to analyze the structure of a book-driven dealer market when the dealer faces competition from a crossing network or dark pool. The agents are privately informed about their types (e.g. their portfolios), which is something that the dealer must take into account when engaging his counterparties. Instead of trading with the dealer, the agents may chose to trade in a crossing network. We show that the presence of such a network results in more types being serviced by the dealer and that, under certain conditions and due to reduced adverse selection effects, the book's spread shrinks. We allow for the pricing on the dealer market to determine the structure of the crossing network and show that the same conditions that lead to a reduction of the spread imply the existence of an equilibrium book/crossing network pair. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1607.04047&r=net |
| By: | Dominik Karos |
| Abstract: | The members of a society are faced with the decision whether or not to participate in an anti-government protest. Their utilities depend on their own decision but also on those of their neighbors in an underlying social network. They randomly observe other people's decisions, gather information on who is already active, and base their decision on their information. The model uses a Markov process (that depends on the underlying social network) to analyze who will become active over time. Two new features are essential: first, only very mild assumptions about the underlying social network are made, in particular agents can be entirely heterogeneous. Second, individuals are allowed to coordinate their decision if they mutually observe each other. The government can use political violence in order to change people's utility from being active. The probability of a revolution can thereby be reduced in the short run, but not in the long run. Under political repression protests do not increase gradually, but suddenly; and the conditional probability of a quick revolution given a protest increases if the regime turns violently against the protesters. Since large jumps in the number of activists depend on their capability to coordinate, the repression of political activism is more effective in countries where social media are not easily accessible. The findings are illustrated by data on the number of protests and revolutions world-wide depending on a country's number on the Political Terror Scale. |
| Keywords: | Social Networks, Coordination, Strong Nash Equilibrium, Innovation Diffusion, Unanticipated Revolutions, Political Repression |
| JEL: | C72 D85 O33 |
| Date: | 2016–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:797&r=net |
| By: | Bastiaan Quast (The Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | Recent attempts to connect the current 'next billion' to the Internet in places such as sub-Saharan Africa have not met expectations. In places where Internet infrastructure has come online and prices have gone down, the expected consequent increase in uptake was not observed. I develop a framework that incorporates language in the the two-sided markets framework, viewing differences as transaction costs. As a result of the cross-side network effects, it is difficult to isolate the causal effect of one on the other. The exogenous introduction of the Setswana language interface on the South African Google Search website was a spillover of the development of that interface for the Botswanan Google website. This exogenous improvement in the accessibility of Setswana-language content has resulted in a substantial increase in the number of native Setswana speakers coming online and owning personal computers. This is turn has also led to increased usage of the Setswana language online. This adoption appears to also lead to improvements in employment. |
| Keywords: | Internet Access, language, two-sided markets |
| JEL: | D47 J15 |
| Date: | 2016–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:gii:cfdwpa:cfdwp01-2016&r=net |
| By: | Pau Milan |
| Abstract: | In this paper I investigate mutual insurance arrangements restricted on a social network. My approach solves for Pareto-optimal sharing rules in a situation where exchanges are limited within a given social network. I provide a formal description of the sharing rule between any pair of linked households as a function of their network position. I test the theory on a unique data set of indigenous villages in the Bolivian Amazon, during the years 2004 to 2009. I find that the observed exchanges across families match the network-based sharing rule, and that the theory can account for the deviation from full insurance observed in the data. I argue that this framework provides a reinterpretation of the standard risk sharing results, predicting household heterogeneity in response to income shocks. I show that this network-based variation in consumption behavior is borne out in the data, and that it can be interpreted economically in terms of consumption volatility. |
| JEL: | D12 D61 D85 O1 O12 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:912&r=net |