nep-net New Economics Papers
on Network Economics
Issue of 2020‒09‒14
thirteen papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Testing, Voluntary Social Distancing and the Spread of an Infection By Daron Acemoglu; Ali Makhdoumi; Azarakhsh Malekian; Asuman Ozdaglar
  2. Distributional Preferences in Adolescent Peer Networks By Schürz, Simon; Alem, Yonas; Kocher, Martin G.; Carlsson, Fredrik; Lindahl, Mikael
  3. Optimal Network Compression By Hamed Amini; Zachary Feinstein
  4. Network goods, price discrimination, and two-sided platforms By BELLEFLAMME, Paul,; PEITZ, Martin,
  5. An optimal test for strategic interaction in social and economic network formation between heterogeneous agents By Andrin Pelican; Bryan S. Graham
  6. Structure in Context: A Morphological View of Whole Network Performance By Kim, Dennie; Funk, Russell; Zaheer, Aks
  7. Persuasion on Networks By Georgy Egorov; Konstantin Sonin
  8. Social distance, speed of containment, and crowding in/out in a network model of contagion By Fabrizio Adriani
  9. Network effects and the appointment of female board members in Japan By Matthias Raddant; Hiroshi Takahashi
  10. Coordination on networks with farsighted and myopic agents By MAULEON Ana,; SCHOPOHL Simon,; TAALAIBEKOVA Akylai,; VANNETELBOSCH Vincent,
  11. Peer effects and endogenous social interactions By Koen Jochmans
  12. Peers as treatments* By Brian Krauth
  13. Modelling COVID-19 contagion: risk assessment and targeted mitigation policies By Rama Cont; Artur Kotlicki; Renyuan Xu

  1. By: Daron Acemoglu; Ali Makhdoumi; Azarakhsh Malekian; Asuman Ozdaglar
    Abstract: We study the effects of testing policy on voluntary social distancing and the spread of an infection. Agents decide their social activity level, which determines a social network over which the virus spreads. Testing enables the isolation of infected individuals, slowing down the infection. But greater testing also reduces voluntary social distancing or increases social activity, exacerbating the spread of the virus. We show that the effect of testing on infections is non-monotone. This non-monotonicity also implies that the optimal testing policy may leave some of the testing capacity of society unused.
    JEL: D62 D85 I18
    Date: 2020–07
  2. By: Schürz, Simon (Department of Economics, University of Gothenburg, Sweden); Alem, Yonas (Environment for Development and Department of Economics, University of Gothenburg, Sweden); Kocher, Martin G. (Department of Economics, University of Vienna, Institute for Advanced Studies, Vienna, Austria, and Department of Economics, University of Gothenburg, Sweden); Carlsson, Fredrik (Department of Economics, University of Gothenburg, Sweden); Lindahl, Mikael (Department of Economics, University of Gothenburg, Sweden)
    Abstract: We study distributional (“social”) preferences in adolescent peer networks. Using incentivized choices between allocations for themselves and a passive agent, children are classified into efficiency-loving, inequality-loving, inequality-averse, and spiteful types. We find that pairs of students who report a friendship link are more likely to exhibit the same preference type than other students that attend the same school. The relation between types is almost completely driven by inequality-loving and spiteful types. Further analyses suggest that preference peer networks are mainly formed by selection into the network and, to a smaller degree, by preference transmission. The role of peer networks in explaining distributional preferences goes beyond network composition effects. A low rank in academic performance and a central position within the network relate positively to a higher likelihood of being classified as spiteful. Hence, social hierarchies seem to be correlated with distributional preference types.
    Date: 2020–08
  3. By: Hamed Amini; Zachary Feinstein
    Abstract: This paper introduces a formulation of the optimal network compression problem for financial systems. This general formulation is presented for different levels of network compression or rerouting allowed from the initial interbank network. We prove that this problem is, generically, NP-hard. We focus on objective functions generated by systemic risk measures under systematic shocks to the financial network. We conclude by studying the optimal compression problem for specific networks; this permits us to study the so-called robust fragility of certain network topologies more generally as well as the potential benefits and costs of network compression.
    Date: 2020–08
  4. By: BELLEFLAMME, Paul, (CORE, Université catholique de Louvain); PEITZ, Martin, (Universität Mannheim)
    Abstract: A monopolist sells a network good to a set of heterogeneous users who all care about total participation. We show that the provider of the network good effectively becomes a two-sided platform if it can condition prices on some user characteristics. This still holds true if the network operator cannot obsoerve consumer characteristics but induces user self-selection when it offers screening contracts. In our setting, all incentive constraints are slack The use of freemium strategies emerges as a special case of versioning. Here, a base version is offered at zero price and a premium version at a positive price. Overall, the paper illustrates the close link between price discrimination in the presence of a network good and pricing by a two-sided platform.
    Keywords: network goods, two-sided markets, platform pricing, group pricing, menu pricing
    JEL: D62 L12 L82 L86
    Date: 2020–07–01
  5. By: Andrin Pelican; Bryan S. Graham
    Abstract: We introduce a test for whether agents' preferences over network structure are interdependent. Interdependent preferences induce strategic behavior since the optimal set of links directed by agent $i$ will vary with the configuration of links directed by other agents. Our model also incorporates agent-specific in- and out-degree heterogeneity and homophily on observable agent attributes. This introduces $2N+K^2$ nuisance parameters ($N$ is number of agents in the network and $K$ the number of possible agent attribute configurations). Under the null equilibrium is unique, but our hypothesis is nevertheless a composite one as the degree heterogeneity and homophily nuisance parameters may range freely across their parameter space. Under the alternative our model is incomplete; there may be multiple equilibrium network configurations and our test is agnostic about which one is selected. Motivated by size control, and exploiting the exponential family structure of our model \emph{under the null}, we restrict ourselves to conditional tests. We characterize the exact null distribution of a family of conditional tests and introduce a novel Markov Chain Monte Carlo (MCMC) algorithm for simulating this distribution. We also characterize the locally best test. The form of this test depends upon the gradient of the likelihood with respect to the strategic interaction parameter in the neighborhood of the null. Remarkably, this gradient, and consequently the form of the locally best test statistic, does not depend on how an equilibrium is selected. Exploiting this lack of dependence, we outline a feasible version of the locally best test.
    Date: 2020–08
  6. By: Kim, Dennie; Funk, Russell; Zaheer, Aks
    Abstract: Network perspectives in organizational research have focused primarily on how the embeddedness of actors shapes individual, or nodal, outcomes. Against this backdrop, a growing number of researchers have begun to adopt a wider lens on organizational networks, shifting the focus to collective, or whole network, performance. Yet, efforts to understand the relationship between whole network structure and whole network performance have produced conflicting findings, which suggests that a different approach may be needed. Drawing on macrostructural sociology, we propose a "whole network morphology" framework, which argues the whole network structure-performance relationship is contingent on other fundamental—relational and cultural—whole network dimensions. Subsequently, we undertake an application of our framework, through which we demonstrate how a morphological view helps address conflicting findings on the structure-performance relationship. Leveraging data on 350 million physician relationships, we study 250 whole networks known as Accountable Care Organizations (ACOs). Consistent with previous work, we do not find a clear association between structural connectedness and performance. However, we find that a more disconnected network structure is associated with negative ACO performance when the relational strength of network ties is high. We also find evidence of better ACO performance in the presence of a physician cultural orientation when the whole network is more connected.
    Date: 2020–08–13
  7. By: Georgy Egorov; Konstantin Sonin
    Abstract: We analyze persuasion in a model in which each receiver can buy a direct access to the sender's signal or rely on her network connections to get it. For the sender, a higher bias increases the impact per direct receiver, yet diminishes the willingness of agents to receive information. Contrary to naive intuition, the optimal propaganda might target peripheral, rather than centrally-located agents, and is at its maximum levels when the probability that information flows between agents is close to zero or one, but not in-between. The impact of network density depends on this probability as well.
    JEL: D85 L82 P16
    Date: 2020–07
  8. By: Fabrizio Adriani (University of Leicester)
    Abstract: We study the effects of an intervention aimed at identifying and containing outbreaks in a network model of contagion where social distance is endogenous. The intervention induces a fall in the risk of infection, to which agents optimally respond by reducing social distance. If the intervention relies on infrequent or inaccurate testing, this crowding out effect may fully offset the intervention's direct effect, so that the risk of infection increases. In these circumstances, we show that "slow" interventions -- which allow the outbreak to spread to immediate neighbors before being contained -- may generate higher ex-ante welfare than "fast" ones and may even "crowd in" social distance. The theory thus identifies a trade off between (i) the swiftness of the intervention and (ii) the scope for crowding out. We show that the nature of this trade off crucially depends on the structure of the underlying social network and prevailing social norms.
    Keywords: Social Distance, Networks, Containment, Testing, Tracing, Contagion, Offsetting Behavior, Crowding Out
    Date: 2020–10
  9. By: Matthias Raddant; Hiroshi Takahashi
    Abstract: We investigate the dynamics in the networks of Japanese corporates and its interplay with the appointment of female board members. We find that firms with female board members show homophily with respect to gender and often have above average profitability. We also find that new appointments of women are more likely at boards which observe female board members at other firms to which they are tied by either ownership relations or corporate board interlocks.
    Date: 2020–07
  10. By: MAULEON Ana, (Université Saint Louis, Bruxelles); SCHOPOHL Simon, (Université Saint-Louis and CORE); TAALAIBEKOVA Akylai, (CORE, UCLouvain and Université Pars 1); VANNETELBOSCH Vincent, (CORE, UCLouvain)
    Abstract: We study a coordination game on a fixed connected network where players have to choose between two projects. Some players are moderate (i.e. they are ex-ante indifferent between both project) while others are stubborn (i.e. They always choose the same project). Benefits for moderaote players are increasing in the number of neighbors who choose the same project. In addition, players are either farsighted or myopic. Farsighted players anticipate the reactions of others while myopic players do not. We show that, when all players are farsighted, full coordination among the moderate players is reached except if there are stubborn players for both projects. When the population is mixed, the set of stable strategy profiles is a refinement of the set of Nash equilibrium strategy profiles. In fact, turning myopic players into farsighted ones eliminates little by little in the inefficient Nash equilibria. Finally, we consider a social planner who can improve coordination by means of two policy instruments: Adding links to the network (socialization) and/or turning myopic players into farsighted ones (education).
    Keywords: networks; coordination problems; stubborn players; farsighted players; stability
    JEL: A14 C70 D20
    Date: 2020–02–11
  11. By: Koen Jochmans
    Abstract: We introduce an approach to deal with self-selection of peers in the linear-in-means model. Contrary to the existing proposals we do not require to specify a model for how the selection of peers comes about. Rather, we exploit two restrictions that are inherent to many such specifications to construct intuitive instrumental variables. These restrictions are that link decisions that involve a given individual are not all independent of one another, but that they are independent of the link behavior between other pairs of individuals. A two-stage least-squares estimator of the linear-in-means model is then readily obtained.
    Date: 2020–08
  12. By: Brian Krauth (Simon Fraser University)
    Abstract: Models of social interactions are often estimated under the strong assumption that an individual's choices are a direct function of the average observed characteristics of his or her reference group. This paper interprets social interactions in a less restrictive potential outcomes framework in which interaction with a given peer or peer group is considered a treatment with an unknown treatment effect. In this framework, conventional peer effect regressions can be interpreted as characterizing treatment effect heterogeneity. This framework is then used to clarify identification and interpretation of commonly-used peer effect models and to suggest avenues for improving upon them.
    Keywords: peer effect; social interactions; peer effect regressions
    Date: 2020–08
  13. By: Rama Cont (LPSM UMR 8001 - Laboratoire de Probabilités, Statistiques et Modélisations - UPMC - Université Pierre et Marie Curie - Paris 6 - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique, MI - Mathematical Institute [Oxford] - University of Oxford [Oxford]); Artur Kotlicki (MI - Mathematical Institute [Oxford] - University of Oxford [Oxford]); Renyuan Xu (MI - Mathematical Institute [Oxford] - University of Oxford [Oxford])
    Abstract: We use a spatial epidemic model with demographic and geographic heterogeneity to study the regional dynamics of COVID-19 across 133 regions in England. Our model emphasises the role of variability of regional outcomes and hetero-geneity across age groups and geographic locations, and provides a framework for assessing the impact of policies targeted towards sub-populations or regions. We define a concept of efficiency for comparative analysis of epidemic control policies and show targeted mitigation policies based on local monitoring to be more efficient than country-level or non-targeted measures. In particular, our results emphasise the importance of shielding vulnerable subpopulations and show that targeted policies based on local monitoring can considerably lower fatality forecasts and, in many cases, prevent the emergence of second waves which may occur under centralised policies.
    Keywords: metapopulation epidemic models,network model,compartmental models,SEIAR model,Nowcasting systems,Stochastic models,nowcasting 1,SARS-n-COV,COVID-19
    Date: 2020–09–01

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