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on Network Economics |
| By: | Sergio Currarini (University of Leicester); Francesco Feri (Royal Holloway, University of London and Università di Trieste); Bjoern Hartig (Royal Hollloway, University of London); Miguel A. Meléndez-Jiménez (University of Málaga) |
| Abstract: | We design an experiment to study how agents make use of information in networks. Agents receive payoff-relevant signals automatically shared with neighbors. We compare the use of information in different network structures, considering games in which strategies are substitute, complement and orthogonal. To study the incentives to share information across games, we also allow subjects to modify the network before playing the game. We find behavioral deviations from the theoretical prediction in the use of information, which depend on the network structure, the position in the network and the strategic nature of the game. There is also a bias toward oversharing information, which is related to risk aversion and the position in the network. |
| Keywords: | networks, experiment, information sharing, strategic complements, strategic substitutes, pairwise stability |
| JEL: | C72 C91 C92 D82 D85 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:mal:wpaper:2020-6&r=all |
| By: | Arun G. Chandrasekhar; Paul Goldsmith-Pinkham; Matthew O. Jackson; Samuel Thau |
| Abstract: | Regional quarantine policies, in which a portion of a population surrounding infections are locked down, are an important tool to contain disease. However, jurisdictional governments - such as cities, counties, states, and countries - act with minimal coordination across borders. We show that a regional quarantine policy's effectiveness depends upon whether (i) the network of interactions satisfies a balanced-growth condition, (ii) infections have a short delay in detection, and (iii) the government has control over and knowledge of the necessary parts of the network (no leakage of behaviors). As these conditions generally fail to be satisfied, especially when interactions cross borders, we show that substantial improvements are possible if governments are proactive: triggering quarantines in reaction to neighbors' infection rates, in some cases even before infections are detected internally. We also show that even a few lax governments - those that wait for nontrivial internal infection rates before quarantining - impose substantial costs on the whole system. Our results illustrate the importance of understanding contagion across policy borders and offer a starting point in designing proactive policies for decentralized jurisdictions. |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2008.10745&r=all |
| By: | LUO Chenghong, (CORE, UCLouvain and Ca’Foscoari University); MAULEON Ana, (Université Saint Louis, Bruxelles); VANNETELBOSCH Vincent, (CORE, UCLouvain) |
| Abstract: | We reconsider die Marti and Zenou (2017) model of friendship network formation where individuals belong to two different communities. Benefits from direct and indirect connections decay with distance while costs of forming links depend on community memberships. Individuals are now either farsighted or myopic when deciding about the friendship links they want to form. When all individuals are myopic many inefficient friendship networks (e.g. complete segregation) can arise. When the larger (smaller) community is farsighted while the smaller (larger) community is myopic, the friendsip network where the myopic community is assimilated into the farsighted community is the unique stable network when inter-community costs are large. In fact, farsightedness helps the society to avoid ending up segregated. Once inter-community costs are small enough, the coplete integration network become stable. Finally, when all individuals are farsighted, the friendship network where the smaller community ends up being assimilated into the dominant community is likely to arise. |
| Keywords: | friendship networks; stable sets; myopic and farsighted players; assimilation; segregation |
| JEL: | A14 C70 D20 |
| Date: | 2020–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2020017&r=all |
| By: | LUO Chenghong, (CORE, UCLouvain and Ca’Foscoari University); MAULEON Ana, (Université Saint Louis, Bruxelles); VANNETELBOSCH Vincent, (CORE, UCLouvain) |
| Abstract: | We propose the notion of coalition-proof stability for predicting the networks that could emerge when group deviations are allowed. A network is coalition-proof stable if there exists no coalition which has a credible group deviation. A coalition is said to have a credible group deviation if there is a profitable group deviation to some network and there is no subcoalition of the deviating players which has a subsequent credible group deviation. Coalition-proof stability is ai coarsening of sotrong stability. There is no relationship between the set of coalition-proof stable networks and the set of networks induced by a coalition-proof Nash equilibrium of Myerson’s linking game. Contrary to coalition-proof stability, coalition-proof Nash equilibria of Myerson’s linking game tend to support unreasonable networks. |
| Keywords: | friendship networks; stable sets; myopic and farsighted players; assimilation; segregation |
| JEL: | A14 C70 D20 |
| Date: | 2020–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2020018&r=all |
| By: | Erol Akcay; David Hirshleifer |
| Abstract: | The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population, and are modified in the process of being transmitted from one agent to another. These cultural evolutionary processes shape market outcomes, which in turn feed back into the success of competing traits. This evolutionary system is studied in an emerging paradigm, new evolutionary finance. In this paradigm, social transmission biases determine the evolution of financial traits in the investor population. It considers an enriched set of cultural traits, both selection on traits and mutation pressure, and market equilibrium at different frequencies. Other key ingredients of the paradigm include psychological bias, social network structure, information asymmetries, and institutional environment. |
| JEL: | D03 D21 D53 D8 D82 D83 D84 D85 D9 D91 D92 G02 G1 G11 G12 G14 G28 G3 G31 G32 G34 G35 O31 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27745&r=all |
| By: | Can Kizilkale; Rakesh Vohra |
| Abstract: | Trades based on bilateral (indivisible) contracts can be represented by a network. Vertices correspond to agents while arcs represent the non-price elements of a bilateral contract. Given prices for each arc, agents choose the incident arcs that maximize their utility. We enlarge the model to allow for polymatroidal constraints on the set of contracts that may be traded which can be interpreted as modeling limited one for-one substitution. We show that for two-sided markets there exists a competitive equilibrium however for multi-sided markets this may not be possible. |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2008.09757&r=all |
| By: | Claudius Graebner (Institute for Socio-Economics, University of Duisburg-Essen, Germany; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; ZOE. Institue for Future-Fit Economies); Jakob Hafele (ZOE. Institue for Future-Fit Economies; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria) |
| Abstract: | This paper investigates the emergence of polarisation patterns in the EU during the last 60 years from a structuralist and complexity economics perspective. Based on the results, feasible opportunities for EU policy-making, which aim to counteract a tendency of polarization, are delineated. The study comprises of a historical analysis of the politico-economic events during this time and a complementary quantitative analysis of the European trade network. The results suggest that trade in the Eurozone is unequal at the expense of the peripheries and follows a pattern of “unequal technological exchange†. The paper also assesses the usefulness of country taxonomies such as ‘cores’ and ‘peripheries’ for identifying the roots of polarization patterns. While it generally affirms the relevance of structural dependencies, and confirms the epistemic usefulness of country taxonomies, it also highlights three challenges – the challenges of dynamics, of ambiguity and granularity – that any such taxonomy necessarily faces, and which must be dealt with explicitly in any structuralist analysis using such taxonomies. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:ico:wpaper:113&r=all |
| By: | Milani, Fabio |
| Abstract: | This paper studies the social and economic responses to the COVID-19 pandemic in a large sample of countries. I stress, in particular, the importance of countries' interconnections to un- derstand the spread of the virus. I estimate a Global VAR model and exploit a dataset on existing social connections across country borders. I show that social networks help explain not only the spread of the disease, but also cross-country spillovers in perceptions about coronavirus risk and in social distancing behavior. In the early phases of the pandemic, perceptions of coronavirus risk in most countries are affected by pandemic shocks originating in Italy. Later, the U.S., Spain, and the U.K. play sizable roles. Social distancing responses to domestic and global health shocks are heterogeneous; however, they almost always exhibit delays and sluggish adjustments. Unemploy- ment responses vary widely across countries. Unemployment is particularly responsive to health shocks in the U.S. and Spain, while unemployment uctuations are attenuated almost everywhere else. |
| Keywords: | COVID-19 Pandemic,Health Shocks,Global VAR,Social Networks,Social Distancing,Cross-Country Spillovers,Unemployment Indicators,Google Trends |
| JEL: | C32 F69 I12 I18 L86 Z13 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:626&r=all |
| By: | Emilia Barili; Paola Bertoli; Veronica Grembi |
| Abstract: | We investigate potential mechanisms of information transmission among patients when explaining territorial variations in the use of cesarean sections. Defining networks as mothers living in the same Italian municipality (average size approximately 10,000 residents), we show that a one standard deviation increase of the incidence of cesarean sections for the 12 months before the delivery date in the future mother’s municipality of residence increases the probability of her receiving the treatment by 3%. This result captures mainly network effects for Italian mothers, while it captures both network and neighborhood effects for foreign mothers. Both groups adjust for the transmission of complementary information, such as the incidence of complications due to cesarean sections. The selection of mothers across hospitals does not uniquely explain our results, which are robust to alternative sample selections. |
| Keywords: | cesarean sections; networks; neighborhood effects; |
| JEL: | I1 I12 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp666&r=all |
| By: | Tomomi Kito; Nagi Moriya; Junichi Yamanoi |
| Abstract: | Much of the research on networks using patent data focuses on citations and the collaboration networks of inventors, hence regarding patents as a positive sign of invention. However, patenting is, most importantly, a strategic action used by companies to compete with each other. This study sheds light on inter-organisational adversarial relationships in patenting for the first time. We constructed and analysed the network of companies connected via patent opposition relationships that occurred between 1980 and 2018. A majority of the companies are directly or indirectly connected to each other and hence form the largest connected component. We found that in the network, many companies disapprove patents in various industrial sectors as well as those owned by foreign companies. The network exhibits heavy-tailed, power-law-like degree distribution and assortative mixing, making it an unusual type of topology. We further investigated the dynamics of the formation of this network by conducting a temporal network motif analysis, with patent co-ownership among the companies considered. By regarding opposition as a negative relationship and patent co-ownership as a positive relationship, we analysed where collaboration may occur in the opposition network and how such positive relationships would interact with negative relationships. The results identified the structurally imbalanced triadic motifs and the temporal patterns of the occurrence of triads formed by a mixture of positive and negative relationships. Our findings suggest that the mechanisms of the emergence of the inter-organisational adversarial relationships may differ from those of other types of negative relationships hence necessitating further research. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.04113&r=all |
| By: | Hiroyasu Inoue; Yohsuke Murase; Yasuyuki Todo |
| Abstract: | To prevent the spread of COVID-19, many cities, states, and countries have `locked down', restricting economic activities in non-essential sectors. Such lockdowns have substantially shrunk production in most countries. This study examines how the economic effects of lockdowns in different regions interact through supply chains, a network of firms for production, simulating an agent-based model of production on supply-chain data for 1.6 million firms in Japan. We further investigate how the complex network structure affects the interactions of lockdowns, emphasising the role of upstreamness and loops by decomposing supply-chain flows into potential and circular flow components. We find that a region's upstreamness, intensity of loops, and supplier substitutability in supply chains with other regions largely determine the economic effect of the lockdown in the region. In particular, when a region lifts its lockdown, its economic recovery substantially varies depending on whether it lifts lockdown alone or together with another region closely linked through supply chains. These results propose the need for inter-region policy coordination to reduce the economic loss from lockdowns. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.06894&r=all |
| By: | Joshua Becker; Abdullah Almaatouq; Agnes Horvat |
| Abstract: | Research on belief formation has produced contradictory findings on whether and when communication between group members will improve the accuracy of numeric estimates such as economic forecasts, medical diagnoses, and job candidate assessments. While some evidence suggests that carefully mediated processes such as the "Delphi method" produce more accurate beliefs than unstructured discussion, others argue that unstructured discussion outperforms mediated processes. Still others argue that independent individuals produce the most accurate beliefs. This paper shows how network theories of belief formation can resolve these inconsistencies, even when groups lack apparent structure as in informal conversation. Emergent network structures of influence interact with the pre-discussion belief distribution to moderate the effect of communication on belief formation. As a result, communication sometimes increases and sometimes decreases the accuracy of the average belief in a group. The effects differ for mediated processes and unstructured communication, such that the relative benefit of each communication format depends on both group dynamics as well as the statistical properties of pre-interaction beliefs. These results resolve contradictions in previous research and offer practical recommendations for teams and organizations. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.07202&r=all |
| By: | Holger Graf (Friedrich Schiller University Jena, Faculty of Economics and Business Administration); Matthias Menter (Friedrich Schiller University Jena, Faculty of Economics and Business Administration) |
| Abstract: | The positive effect of public research on industrial innovations is beyond controversy: public research institutions produce knowledge that is subsequently transferred into product and process innovations by private businesses. Besides this rather passive role in commercializing inventions, public research institutions may also proactively exploit new knowledge through public sector entrepreneurship activities. Especially entrepreneurial universities are perceived as a conduit of knowledge spillovers, as they serve as central actors of innovation networks and stimulate network activities. Whereas the linkages between network embeddedness and innovation activities have been largely explored, the impact on patent quality in terms of radicalness, originality and generality remains rather unclear. Considering Germany’s diverse public research infrastructure (universities, polytechnics, and non-university research institutes), our findings reveal that the type of institution and the corresponding scientific orientation (basic vs. applied research) matter for the quality of inventions. Centrality of respective institutions within innovation networks thereby reinforces the radicalness of inventions. However, we do not find support for the general assumption that an entrepreneurial orientation of public sector entities augments the quality of inventions. We conclude the paper with policy recommendations as well as with future avenues of research. |
| Keywords: | patent quality, radical innovation, entrepreneurial university, network embeddedness, centrality |
| JEL: | O31 O32 O34 |
| Date: | 2020–07–19 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2020-011&r=all |
| By: | Marina Azzimonti; Alessandra Fogli; Fabrizio Perri; Mark Ponder |
| Abstract: | We develop an ECON-EPI network model to evaluate policies designed to improve health and economic outcomes during a pandemic. Relative to the standard epidemiological SIR set-up, we explicitly model social contacts among individuals and allow for heterogeneity in their number and stability. In addition, we embed the network in a structural economic model describing how contacts generate economic activity. We calibrate it to the New York metro area during the 2020 COVID-19 crisis and show three main results. First, the ECON-EPI network implies patterns of infections that better match the data compared to the standard SIR. The switching during the early phase of the pandemic from unstable to stable contacts is crucial for this result. Second, the model suggests the design of smart policies that reduce infections and at the same time boost economic activity. Third, the model shows that reopening sectors characterized by numerous and unstable contacts (such as large events or schools) too early leads to fast growth of infections. |
| JEL: | D85 E23 E65 I18 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27741&r=all |
| By: | Giovanni Calice; Carlo Sala; Daniele Tantari |
| Abstract: | We study the role of contingent convertible bonds (CoCos) in a network of interconnected banks. We first confirm the phase transitions documented by Acemoglu et al. (2015) in absence of CoCos, thus revealing that the structure of the interbank network is of fundamental importance for the effectiveness of CoCos as a financial stability enhancing mechanism. Furthermore, we show that in the presence of a moderate financial shock lightly interconnected financial networks are more robust than highly interconnected networks, and can possibly be the optimal choice for both CoCos issuers and buyers. Finally our results show that, under some network structures, the presence of CoCos can increase (and not reduce) financial fragility, because of the occurring of unneeded triggers and consequential suboptimal conversions that damage CoCos investors. |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.00062&r=all |