nep-net New Economics Papers
on Network Economics
Issue of 2022‒02‒28
eleven papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Optimism leads to optimality: Ambiguity in network formation By Bayer, Peter; Guerdjikova, Ani
  2. In platforms we trust: misinformation on social networks in the presence of social mistrust By Charlson, G.
  3. Referral Hiring and Social Network Structure By Yoshitaka Ogisu
  4. Altruism Networks, Income Inequality, and Economic Relations By Yann Bramoullé; Rachel Kranton
  5. Key Links in Network Interactions: Assessing Route-Specific Travel Restrictions in China during the COVID-19 Pandemic By Chen, Xi; Qiu, Yun; Shi, Wei; Yu, Pei
  6. How production networks amplify economic growth By McNerney, J.; Savoie, C.; Caravelli, F.; Carvalho, W. M.; Farmer, J. D.
  7. Best-response dynamics in directed network games By Bayer, Peter; Kozics, György; Szöke, Nora Gabriella
  8. Conforming with Peers in Honesty and Cooperation By Isler, Ozan; Gächter, Simon
  9. Social media, polarization and democracy: A multi-methods analysis of polarized users' interactions on Reddit's r/WallStreetBets By Massoc, Elsa; Lubda, Maximilian
  10. Alumni Job Networks at Elite Universities and the Efficacy of Affirmative Action By Machado, Cecilia; Reyes, Germán; Riehl, Evan
  11. Diffusing Political Concerns: How Unemployment Information passed between social Ties Influence Danish Voters By Alt, James E.; Jensen, Amalie; Larreguy, Horacio; Lassen, David D.; Marshall, John

  1. By: Bayer, Peter; Guerdjikova, Ani
    Abstract: We analyze a model of endogenous two-sided network formation where players are affected by uncertainty in their opponents’ decisions. We model this uncertainty using the notion of equilibrium under ambiguity. Unlike the set of Nash equilibria, the set of equilibria under ambiguity does not always include underconnected and thus inefficient networks such as the empty network. On the other hand, it may include networks with unreciprocated, one-way links, which comes with an efficiency loss as linking efforts are costly. We characterize equilibria under ambiguity and provide conditions under which increased player optimism comes with an increase in connectivity and realized benefits in equilibrium. Next, we analyze network realignment under a myopic updating process with optimistic shocks, and derive a global stability condition of efficient networks. Under this condition, called ‘aligned preferences’, a subset of the Pareto optimal equilibrium networks is reached, specifically, networks that maximize the players’ total benefits of connections.
    Date: 2022–01–21
  2. By: Charlson, G.
    Abstract: We examine the effect social mistrust has on the propagation of misinformation on a social network. Agents communicate with each other and observe information sources, changing their opinion with some probability determined by their social trust, which can be low or high. Low social trust agents are less likely to be convinced out of their opinion by their peers and, in line with recent empirical literature, are more likely to observe misinformative information sources. A platform facilitates the creation of a homophilic network where users are more likely to connect with agents of the same level of social trust and the same social characteristics. Networks in which worldview is relatively important in determining network structure have more pronounced echo chambers, reducing the extent to which high and low social trust agents interact. Due to the asymmetric nature of these interactions, echo chambers then decrease the probability that agents believe misinformation. At the same time, they increase polarisation, as disagreeing agents interact less frequently, leading to a trade-off which has implications for the optimal intervention of a platform wishing to reduce misinformation. We characterise this intervention by delineating the most effective change in the platform's algorithm, which for peer-to-peer connections involves reducing the extent to which relatively isolated high and low social trust agents interact with one another.
    Keywords: communication, misinformation, network design, platforms
    JEL: D82 D83 D85
    Date: 2022–01–14
  3. By: Yoshitaka Ogisu
    Abstract: It is well known that differences in the average number of friends among social groups can cause inequality in the average wage and/or unemployment rate. However, the impact of social network structure on inequality is not evident. In this paper, we show that not only the average number of friends but also the heterogeneity of degree distribution can affect inter-group inequality. A worker group with a scale-free network tends to be disadvantaged in the labor market compared to a group with an Erd\H{o}s-R\'{e}nyi network structure. This feature becomes strengthened as the skewness of the degree distribution increases in scale-free networks. We show that the government's policy of discouraging referral hiring worsens social welfare and can exacerbate inequality.
    Date: 2022–01
  4. By: Yann Bramoullé (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Rachel Kranton (Duke University [Durham])
    Abstract: What patterns of economic relations arise when people are altruistic rather than strategically self-interested? This paper introduces an altruism network into a simple model of choice among partners for economic activity. With concave utility, agents effectively become inequality averse towards friends and family. Rich agents preferentially choose to work with poor friends despite productivity losses. Hence, network inequality-the divergence in incomes within sets of friends and family-is key to how altruism shapes economic relations and output. Skill homophily also plays a role; preferential contracts and productivity losses decline when rich agents have poor friends with requisite skills.
    Date: 2022–02–09
  5. By: Chen, Xi (Yale University); Qiu, Yun (Jinan University); Shi, Wei (Jinan University); Yu, Pei (Rice University)
    Abstract: We consider a model of network interactions where the outcome of a unit depends on the outcomes of the connected units. We determine the key network link, i.e., the network link whose removal results in the largest reduction in the aggregate outcomes, and provide a measure that quantifies the contribution of a network link to the aggregate outcomes, which complements the intercentrality measure of the key network node proposed by Ballester, Calvó-Armengol, and Zenou (2006). We provide an example examining the spread of Covid-19 in China. Travel restrictions were imposed to limit the spread of infectious diseases. As uniform restrictions can be inefficient and incur unnecessarily high costs, we examine the design of restrictions that target specific travel routes. Our approach may be generalized to multiple countries to guide policies during epidemics ranging from ex ante route-specific travel restrictions to ex post health measures based on travel histories, and from the initial travel restrictions to the phased reopening.
    Keywords: network interactions, key network links, COVID-19, transmission
    JEL: C21 I18 D85 H75
    Date: 2022–01
  6. By: McNerney, J.; Savoie, C.; Caravelli, F.; Carvalho, W. M.; Farmer, J. D.
    Abstract: Technological improvement is the most important cause of long-term economic growth. We study the effects of technology improvement in the setting of a production network, in which each producer buys input goods and converts them to other goods, selling the product to households or other producers. We show how this network amplifies the effects of technological improvements as they propagate along chains of production. Longer production chains for an industry bias it towards faster price reduction, and longer production chains for a country bias it towards faster GDP growth. These predictions are in good agreement with data and improve with the passage of time, demonstrating a key influence of production chains in price change and output growth over the long term.
    Keywords: Production networks, Growth, Multi-sector models, Productivity
    Date: 2021–12–10
  7. By: Bayer, Peter; Kozics, György; Szöke, Nora Gabriella
    Abstract: We study public goods games played on networks with possibly non-recip-rocal relationships between players. Examples for this type of interactions include one-sided relationships, mutual but unequal relationships, and par-asitism. It is well known that many simple learning processes converge to a Nash equilibrium if interactions are reciprocal, but this is not true in general for directed networks. However, by a simple tool of rescaling the strategy space, we generalize the convergence result for a class of directed networks and show that it is characterized by transitive weight matrices and quadratic best-response potentials. Additionally, we show convergence in a second class of networks; those rescalable into networks with weak exter-nalities. We characterize the latter class by the spectral properties of the absolute value of the network’s weight matrix and by another best-response potential structure.
    Keywords: Networks; externalities; local public goods; potential games; non-reciprocal relations
    JEL: C72 D62 D85
    Date: 2022–01–21
  8. By: Isler, Ozan (Queensland University of Technology); Gächter, Simon (University of Nottingham)
    Abstract: Peer observation can influence social norm perceptions as well as behavior in various moral domains, but is the tendency to be influenced by and conform with peers domain-general? In an online experiment (N = 815), we studied peer effects in honesty and cooperation and tested the individual-level links between these two moral domains. Participants completed both honesty and cooperation tasks after observing their peers. Consistent with the literature, separate analysis of the two domains indicated both negative and positive peer influences in honesty and in cooperation, with negative influences tending to be stronger. Behavioral tests linking the two domains at the individual-level revealed that cooperative participants were also more honest—a link that was associated with low Machiavellianism scores. While standard personality trait measures showed no links between the two domains in the tendency to conform, individual-level tests suggested that conformism is a domain-general behavioral trait observed across honesty and cooperation. Based on these findings, we discuss the potential of and difficulties in using peer observation to influence social norm compliance as an avenue for further research and as a tool to promote social welfare.
    Keywords: conformism, peer influence, cooperation, honesty, social norms
    JEL: C91 J16
    Date: 2021–12
  9. By: Massoc, Elsa; Lubda, Maximilian
    Abstract: In times of increased political polarization, the continuing existence of a deliberative arena where people with antagonistic views may engage with each other in non-violent ways is critical for democracy to live on. Social media are usually not conceived as such arenas. On the contrary, there has been widespread worry about their role in increasing polarization and political violence. This paper suggests a more positive impact of social media on democracy. Our analysis focuses on the subreddit "r/WallStreetBets" (r/WSB) - a finance-related forum that came under the spotlight when its users coordinated a financial attack on hedge funds during the Gamestop saga in early 2021. Based on an original method attributing partisanship scores to users, we present a network analysis of interactions between users at the opposite sides of the political spectrum on r/WSB. We then develop a content analysis of politically relevant threads in which polarized users participate. Our analyses show that r/WSB provides a rare space where users with antagonistic political leanings engage with each other, debate, and even cooperate.
    Keywords: social media,polarization,democracy,investment forum,social media,polarization,democracy,investment forum
    Date: 2022
  10. By: Machado, Cecilia (Fundação Getúlio Vargas); Reyes, Germán (Cornell University); Riehl, Evan (Cornell University)
    Abstract: We examine the efficacy of affirmative action at universities whose value depends on peer and alumni networks. We study an elite Brazilian university that adopted race- and income-based affirmative action at a large scale. Using employer-employee data, we show that a key benefit of attending the university is access to high-paying jobs affiliated with its alumni. Affirmative action increased disadvantaged students' access to these firms and raised their early-career earnings. But these benefits faded over time. Further, the increase in student body diversity lowered the job prospects and earnings of the school's most highly ranked students.
    Keywords: affirmative action, alumni network, higher education
    JEL: I23 I26 J31
    Date: 2022–01
  11. By: Alt, James E.; Jensen, Amalie; Larreguy, Horacio; Lassen, David D.; Marshall, John
    Abstract: While social pressure is widely believed to influence voters, evidence that informa-tion passed between social ties affects beliefs, policy preferences, and voting behav-ior is limited. We investigate whether information about unemployment shocks dif-fuses through networks of strong and mostly weak social ties and influences voters in Denmark. We link surveys with population-level administrative data that logs un-employment shocks afflicting respondents’ familial, vocational, and educational net-works. Our results show that the share of second-degree social ties—individuals that voters learn about indirectly—that became unemployed within the last year increases a voter’s perception of national unemployment, self-assessed risk of becoming unem-ployed, support for unemployment insurance, and voting for left-wing political parties. Voters’ beliefs about national aggregates respond to all shocks equally, whereas sub-jective perceptions and preferences respond primarily to unemployment shocks afflict-ing second-degree ties in similar vocations. This suggests that information diffusion through social ties principally affects political preferences via egotropic—rather than sociotropic—motives.
    Date: 2022–01–24

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