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on Network Economics |
| By: | Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Sophia Ding (ETH Zurich); Peter H. Egger (ETH Zurich and CEPR) |
| Abstract: | Many data situations require the consideration of network effects among the cross-sectional units of observation. In this paper, we present a generalized panel model which accounts for two features: (i) three types of network effects on the right-hand side of the model, namely through weighted dependent variable, weighted exogenous variables, as well as weighted error components, and (ii) higher-order network effects due to ex-ante unknown network-decay functions or the presence of multiplex (or multi-layer) networks among all of those. We outline the model, the basic assumptions, and present simulation results. |
| Keywords: | Spatial and Network Interdependence, Panel Data, Higher-Order Network Effects |
| JEL: | C23 C33 C34 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:max:cprwps:233&r=all |
| By: | Luca P. Merlino; Paolo Pin; Nicole Tabasso |
| Abstract: | We study the diffusion of a true and a false message (the rumor) in a social network. Upon hearing a message, individuals may believe it, disbelieve it, or debunk it through costly verification. Whenever the truth survives in steady state, so does the rumor. Online social communication exacerbates relative rumor prevalence as long as it increases homophily or verification costs. Our model highlights that successful policies in the fight against rumors increase individuals' incentives to verify. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.01018&r=all |
| By: | Lina Zhang |
| Abstract: | In studies of program evaluation under network interference, correctly measuring spillovers of the intervention is crucial for making appropriate policy recommendations. However, increasing empirical evidence has shown that network links are often measured with errors. This paper explores the identification and estimation of treatment and spillover effects when the network is mismeasured. I propose a novel method to nonparametrically point-identify the treatment and spillover effects, when two network observations are available. The method can deal with a large network with missing or misreported links and possesses several attractive features: (i) it allows heterogeneous treatment and spillover effects; (ii) it does not rely on modelling network formation or its misclassification probabilities; and (iii) it accommodates samples that are correlated in overlapping ways. A semiparametric estimation approach is proposed, and the analysis is applied to study the spillover effects of an insurance information program on the insurance adoption decisions. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.09614&r=all |
| By: | Pápai, Zoltán; McLean, Aliz; Nagy, Péter; Szabó, Gábor; Csorba, Gergely |
| Abstract: | The rollout of fifth generation mobile networks is progressing around the world, but 5G looks especially expensive compared to previous generations. Network sharing between two or more mobile operators is an obvious way to attain significant cost savings, but may also raise competition concerns. This paper first distinguishes between early and mature 5G, and then discusses the expected changes mature 5G brings to the assessment of active mobile network sharing agreements from a competition policy point of view. We focus on the three main concerns where 5G may bring the most significant changes in the evaluation compared to 4G: service differentiation, cost commonality between the parties and the parties' ability and incentives to grant access to critical inputs to downstream competitors. For each of these concerns, we show that they are not easy to substantiate and in some cases the concerns may even become less grave than under 4G. |
| Keywords: | mobile telecommunications,network sharing,competition policy,competitive assessment,5G |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itso20:224870&r=all |
| By: | Emilien Macault; Marco Scarsini; Tristan Tomala |
| Abstract: | We consider a discrete-time nonatomic routing game with variable demand and uncertain costs. Given a fixed routing network with single origin and destination, the costs functions on edges depend on some uncertain persistent state parameter. Every period, a variable traffic demand routes through the network. The experienced costs are publicly observed and the belief about the state parameter is Bayesianly updated. This paper studies the dynamics of equilibrium and beliefs. We say that there is strong learning when beliefs converge to the truth and there is weak learning when equilibrium flows converge to those under complete information. Our main result is a characterization of the networks for which learning occurs for all increasing cost functions, given highly variable demand. We prove that these networks have a series-parallel structure and provide a counterexample to prove that the condition is necessary. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.11580&r=all |
| By: | Daniel Straulino; Mattie Landman; Neave O'Clery |
| Abstract: | Here we propose a new method to compare the modular structure of a pair of node-aligned networks. The majority of current methods, such as normalized mutual information, compare two node partitions derived from a community detection algorithm yet ignore the respective underlying network topologies. Addressing this gap, our method deploys a community detection quality function to assess the fit of each node partition with respect to the other network's connectivity structure. Specifically, for two networks A and B, we project the node partition of B onto the connectivity structure of A. By evaluating the fit of B's partition relative to A's own partition on network A (using a standard quality function), we quantify how well network A describes the modular structure of B. Repeating this in the other direction, we obtain a two-dimensional distance measure, the bi-directional (BiDir) distance. The advantages of our methodology are three-fold. First, it is adaptable to a wide class of community detection algorithms that seek to optimize an objective function. Second, it takes into account the network structure, specifically the strength of the connections within and between communities, and can thus capture differences between networks with similar partitions but where one of them might have a more defined or robust community structure. Third, it can also identify cases in which dissimilar optimal partitions hide the fact that the underlying community structure of both networks is relatively similar. We illustrate our method for a variety of community detection algorithms, including multi-resolution approaches, and a range of both simulated and real world networks. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.06568&r=all |
| By: | Banu Demir Pakel; Beata Smarzynska Javorcik; Tomasz K. Michalski; Evren Ors |
| Abstract: | This study finds that even small unexpected supply shocks propagate downstream through production networks and are amplified by firms with short-term financial constraints. The unexpected 2011 increase in the tax on imports purchased with foreign-sourced trade credit is examined using data capturing almost all Turkish supplier-customer links. The identification strategy exploits the heterogeneous impact of the shock on importers. The results indicate that this relatively minor, non-localized shock had a non-trivial economic impact on exposed firms and propagated downstream through affected suppliers. Additional empirical tests, motivated by a simple theory, demonstrate that low-liquidity firms amplified its transmission. |
| Keywords: | production networks, shock transmission, financing constraints, liquidity |
| JEL: | F14 F61 G23 L14 E23 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8607&r=all |
| By: | Austin Knies; Emerson Melo |
| Abstract: | We introduce a route choice model that incorporates the notion of choice aversion in transportation networks. Formally, we propose a recursive logit model which incorporates a penalty term that accounts for the dimension of the choice set at each node of the network. We make three contributions. First, we show that our model overcomes the correlation problem between routes, a common pitfall of traditional logit models. In particular, our approach can be seen as an alternative to the class of models known as Path Size Logit (PSL). Second, we show how our model can generate violations of regularity in the path choice probabilities. In particular, we show that removing edges in the network can decrease the probability of some existing paths. Finally, we show that under the presence of choice aversion, adding edges to the network can increase the total cost of the system. In other words, a type of Braess's paradox can emerge even in the case of uncongested networks. We show that these phenomena can be characterized in terms of a parameter that measures users' degree of choice aversion. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.02398&r=all |
| By: | Aref Mahdavi Ardekani (Centre d'Economie de la Sorbonne) |
| Abstract: | By applying the interbank network simulation, this paper examines whether the causal relationship between capital and liquidity is influenced by bank positions in the interbank network. While existing literature highlights the causal relationship that moves from liquidity to capital, the question of how interbank network characteristics affect this relationship remains unclear. Using a sample of commercial banks from 28 European countries, this paper suggests that bank's interconnectedness within interbank loan and deposit networks affects their decisions to set higher or lower regulatory capital ratios when facing higher iliquidity. This study provides support for the need to implement minimum liquidity ratios to complement capital ratios, as stressed by the Basel Committee on Banking Regulation and Supervision. This paper also highlights the need for regulatory authorities to consider the network characteristics of banks |
| Keywords: | Interbank network topology; Bank regulatory capital; Liquidity risk; Basel III |
| JEL: | G21 G28 L14 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:20022&r=all |
| By: | Oliver Rehbein; Simon Rother |
| Abstract: | This paper analyzes social connectedness as an information channel in bank lending. We move beyond the inefficient lending between peers in exclusive networks by exploiting Facebook data that reflect social ties within the U.S. population. After accounting for physical and cultural distances, social connectedness increases cross-county lending, especially when lending requires more information and screening incentives are intact. On average, a standard-deviation increase in social connectedness increases cross-county lending by 24.5%, which offsets the lending barrier posed by 600 miles between borrower and lender. While the ex-ante risk of a loan is unrelated to social connectedness, borrowers from well-connected counties cause smaller losses if they default. Borrowers' counties tend to profit from their social proximity to bank lending, as GDP growth and employment increase with social proximity. Our results reveal the important role of social connectedness in bank lending, partly explain the large effects of physical distance, and suggest implications for antitrust policies. |
| Keywords: | bank lending, social networks, information frictions, culture, distance |
| JEL: | D82 D83 G21 O16 L14 Z13 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_162v2&r=all |
| By: | Oliver Rehbein; Simon Rother |
| Abstract: | This paper provides empirical evidence that banks leverage social connections as an information channel. Using county-to-county friendship-link data from Facebook, we find that strong social ties increase loan volumes, especially if screening incentives are large. This effect is distinct from physical and cultural distances. Physical distance becomes significantly less relevant when accounting for social connections. Moreover, sufficiently strong social ties prevent cultural differences from constituting a lending barrier. The effect of social connectedness is more supply-side driven for small banks but demand-side driven for large banks. To bolster identification, we exploit highway connections, historical travel costs, and the quasi-random staggered introduction of Facebook as instruments. Our results reveal the important role of social connectedness as an information channel, speak to the nature of borrowing constraints, and point toward implications for bank-lending strategies and anti-trust policies. |
| Keywords: | bank lending, social networks, information frictions, culture, distance |
| JEL: | D82 D83 G21 O16 L14 Z13 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_162v1&r=all |
| By: | Ioannou, Nikos; Logothetis, Vangelis; Petre, Konstantin; Tselekounis, Markos; Chipouras, Aris; Katsianis, Dimitris; Varoutas, Dimitris |
| Abstract: | According to the 2013/466/ΕC Recommendation for setting copper and NGA wholesale access prices where cost orientation is imposed as a remedy, NRAs should adopt a BU LRIC+ costing methodology that estimates the current cost that a hypothetical efficient operator would incur to build a modern efficient NGA network. The starting point of modeling an efficient operator investing in NGA networks is the network modeling approach. In this paper, we compare the most widely adopted network modeling approaches in terms of wholesale FTTH prices. In particular, the modified scorched node approach is compared to the extreme cases of the scorched node and the scorched earth approaches. Τhe comparison between the aforementioned scenarios sheds light on the impact of each approach on the wholesale FTTH prices. The main finding of this paper is that the scorched earth approach leads to a maximum of 10% reduction in the short-term access prices compared to the most inefficient scorched node approach, whereas further extending its optimizations by optimizing the number of central offices, both the short-term and long-term wholesale price reductions are quite significant (more than 20%) regardless of service speeds. Obviously, these findings provide valuable information to both network operators and telecom regulators. |
| Keywords: | FTTH,(Modified) scorched node,scorched earth,wholesale NGA prices |
| JEL: | L43 L51 L96 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itso20:224857&r=all |