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on Network Economics |
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Issue of 2018‒04‒30
six papers chosen by Pedro CL Souza Pontifícia Universidade Católica do Rio de Janeiro |
| By: | Eraslan, Hulya (Rice University); Tang, Xun (Rice University) |
| Abstract: | We study the identification and estimation of large network games where each individual holds private information about its links and payoffs. Extending Galeotti, Goyal, Jackson, Vega-Redondo and Yariv (2010), we build a tractable empirical model of network games where the individuals are heterogenous with private link and payoff information, and characterize its unique, symmetric pure-strategy Bayesian Nash equilibrium. We then show that the parameters in individual payoffs are identified under "large market" asymptotics, whereby the number of individuals increases to infinity in a fixed and small number of networks. We also propose a consistent two-step m-estimator for individual payoffs. Our method is distribution-free in that it does not require parametrization of the distribution of shocks in individual payoffs. Monte Carlo simulation show that our estimator has good performance in moderate-sized samples. |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:riceco:17-002&r=net |
| By: | Camilo García-Jimeno; Angel Iglesias; Pinar Yildirim |
| Abstract: | How do social interactions shape collective action, and how are they mediated by the availability of networked information technologies? To answer these questions, we study the Temperance Crusade, one of the earliest instances of organized political mobilization by women in the U.S. This wave of protest activity against liquor dealers spread between the winter of 1873 and the summer of 1874, covering more than 800 towns in 29 states. We first provide causal evidence of social interactions driving the diffusion of the protest wave, and estimate the roles played by information traveling along railroad and telegraph networks. We do this by relying on exogenous variation in the rail network links generated by railroad worker strikes and railroad accidents. We also develop an event-study methodology to estimate the complementarity between rail and telegraph networks in driving the spread of the Crusade. We find that railroad and telegraph-mediated information about neighboring protest activity were main drivers of the diffusion of the protest movement. We also find strong complementarities between both networks. Using variation in the types of protest activities of neighboring towns and in the aggregate patterns of the diffusion process, we also find suggestive evidence of social learning as a key mechanism behind the effect of information on protest adoption. |
| JEL: | D71 D83 N11 N31 N71 O18 Z12 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24495&r=net |
| By: | Phillip Monin (Office of Financial Research); Richard Bookstaber (University of California) |
| Abstract: | Markets coordinate the flow of information in the economy, aggregating it through the price mechanism. We develop a dynamic model of information transmission and aggregation in financial and other social networks in which continued membership in the network is contingent on the accuracy of opinions. Agents have opinions about a state of the world and form links to others in a directed fashion probabilistically. Agents update their opinions by averaging those of their connections, weighted by how long their connections have been in the system. Agents survive or die based on how far their opinions are from the true state. In contrast to the results in the extant literature on DeGroot learning, we show through simulations that for some parameterizations the model cycles stochastically between periods of high connectivity, in which agents arrive at a consensus opinion close to the state, and periods of low connectivity in which agents’ opinions are widely dispersed. We add varying degrees of homophily through a model parameter called tribal preference and find that crash frequency is decreasing in the degree of homophily. Our results suggest that the information aggregation function of markets can fail solely because of the dynamics of information flows, irrespective of shocks or news. |
| Keywords: | social networks, DeGroot learning, dynamic network formation, information transmission, nonlinear dynamical systems, crashes |
| Date: | 2017–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:ofr:discus:17-01&r=net |
| By: | Olcina, Gonzalo (Universidad de Valencia); Panebianco, Fabrizio (Bocconi University); Zenou, Yves (Monash University) |
| Abstract: | We consider a model where each individual (or ethnic minority) is embedded in a network of relation-ships and decides whether or not she wants to be assimilated to the majority norm. Each individual wants her behavior to agree with her personal ideal action or norm but also wants her behavior to be as close as possible to the average assimilation behavior of her peers. We show that there is always convergence to a steady-state and characterize it. We also show that different assimilation norms may emerge in steady state depending on the structure of the network. We then consider the role of cultural and government leaders in the assimilation process of ethnic minorities and an optimal tax/subsidy policy which aim is to reach a certain level of assimilation in the population. |
| Keywords: | assimilation, networks, social norms, peer pressure, cultural leader |
| JEL: | D83 D85 J15 Z13 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11436&r=net |
| By: | Chen, Xi (Yale University); Sahn, David E. (Cornell University); Zhang, Xiaobo (Peking University) |
| Abstract: | Despite the resultant disutility, some people, in particular, the poor, are engaged in behaviors that carry social stigma. Empirical studies on stigmatized behavior are rare, largely due to the formidable challenges of collecting data on stigmatized goods and services. In this paper, we add to this limited empirical evidence by examining the behavior of "donating" blood plasma in exchange for cash rewards in China. We do so using two primary data sets: the first is a three-wave, census‐type household survey that enables us to examine the evolving patterns and determinants of "donating" plasma. The second is data on detailed gift exchange records of all households. The data allow us to define reference groups, measure the intensity of social interactions, and identify peer effects using a novel network structure‐based instrumental variable strategy. We find that peer effects influence decisions to "donate" plasma. For example, a one‐standard‐deviation increase in income from "donating" plasma in the peer group increases the value of own plasma "donation" by 0.15 standard deviations. Families with sons have more incentives to "donate" plasma to offset the escalated costs of getting their sons married in a tight marriage market that favors girls. |
| Keywords: | social stigma, social networks, peer influence, plasma "donation", China |
| JEL: | O1 Z1 R2 D8 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11413&r=net |
| By: | Amarasinghe, Ashani; Hodler, Roland; Raschky, Paul A.; Zenou, Yves |
| Abstract: | The aggregate economic impact of any developmental project depends on its effects within the chosen administrative region as well as its economic spillovers into other regions. However, little is known about how these spillovers propagate through geographic, ethnic and road networks. In this paper, we analyze both theoretically and empirically the role of these networks in the spatial diffusion of local economic shocks. We develop a network model that shows how a district's level of prosperity is related to its position in the network. The network model's first-order conditions are used to derive an econometric model of spatial spillovers that we estimate using a panel of 5,944 districts from 53 African countries over the period 1997-2013. To identify the causal effect of spatial diffusion, we exploit cross sectional variation in the location of mineral mines and exogenous time variation in world mineral prices. Our results show that road and ethnic connectivity are particularly important factors for diffusing economic spillovers over longer distances. We then use the estimated parameters from the econometric model to calculate the key player centralities, which determine which districts are key in propagating local economic shocks across Africa. We further show how counterfactual exercises based on these estimates and the underlying network structure can inform us about the potential gains from policies that increase economic activity in specific districts or improve road connectivity between districts. |
| Keywords: | economic development; key player centrality; Natural resources; networks; spatial spillovers; sub-Saharan Africa.; Transportation |
| JEL: | O13 O55 R12 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12854&r=net |