nep-net New Economics Papers
on Network Economics
Issue of 2023‒08‒21
four papers chosen by
Alfonso Rosa García, Universidad de Murcia

  1. Intermediaries’ Substitutability and Financial Network Resilience: A Hyperstructure Approach By Olivier Accominotti; Delio Lucena-Piquero; Stefano Ugolini
  2. Public Goods in Networks: Comparative Statics Results By Sebastian Bervoets; Kohmei Makihara
  3. Beyond Domar Weights: A New Measure of Systemic Importance in Production Networks  By Girish Bahal; Damian Lenzo
  4. Global path preference and local response: A reward decomposition approach for network path choice analysis in the presence of locally perceived attributes By Yuki Oyama

  1. By: Olivier Accominotti; Delio Lucena-Piquero (LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - Institut d'Études Politiques [IEP] - Toulouse - ENSFEA - École Nationale Supérieure de Formation de l'Enseignement Agricole de Toulouse-Auzeville); Stefano Ugolini (LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - Institut d'Études Politiques [IEP] - Toulouse - ENSFEA - École Nationale Supérieure de Formation de l'Enseignement Agricole de Toulouse-Auzeville)
    Abstract: This article studies the impact of intermediaries' disappearance on firms' access to the sterling money market during the first globalization era of 1880-1914. We propose a new methodology to assess intermediaries' substitutability in financial networks featuring higher-order structures (credit intermediation chains). We represent the financial network as a hyperstructure and each credit intermediation chain as a hyperedge. This approach allows us to assess how the failure of intermediaries affects network connectivity. We apply this methodology to a unique dataset documenting the network structure of the sterling money market in the year 1906. Our results reveal that the failure of individual money market actors could only cause limited damage to the network as intermediaries were highly substitutable. These findings suggest that an international financial network without highly systemic nodes can emerge even at a time of global economic integration.
    Keywords: Financial networks, Systemic risk, Hypergraphs, Intermediation chains, Bills of exchange, Hyperstructures
    Date: 2023–06–28
  2. By: Sebastian Bervoets (Aix Marseille Univ, CNRS, AMSE, Marseille, France); Kohmei Makihara (Aix Marseille Univ, CNRS, AMSE, Marseille, France)
    Abstract: We consider public goods games played on a potentially non-symmetric network and provide comparative statics results on individual and aggregate contributions, as well as on the effect of transfers between players. We show that, contrary to the case of the complete and symmetric network, a positive shock on a player can have adverse consequences. First, it could actually decrease this player's contribution, unless the interaction matrix is a P-matrix. Second, a positive shock on a contributing player increases aggregate contributions, but a positive shock on a non-contributing player will decrease aggregate contributions, even if the player who benefited from the positive shock increases his own contribution. In each case we provide simple conditions to determine whether a positive shock will have positive or negative consequences on contributions, by looking at the unconstrained solution of an alternative, associated game. The sign of the coordinates of this solution determines the effect of a shock. With this in hand, we further show that the aggregate neutrality result of Andreoni [1990] regarding transfers between players generally does not hold on non-symmetric networks and provide conditions for it to hold. Finally, as an application of previous results, we consider introducing agents that follow Kantian moral principles and show that, depending on their position in the network, the presence of Kantian agents can, counter-intuitively, lead to a decrease in aggregate contributions.
    Keywords: public Goods, Network, comparative Statics, kantian players
    Date: 2023–07
  3. By: Girish Bahal; Damian Lenzo
    Abstract: We present a new measure of producers’ aggregate importance in a production economy with input-output linkages. Unlike existing measures, which capture the impact of an isolated TFP shock to a sector on aggregate output, we quantify how a sector amplifies simultaneous shocks to all producers in the economy. In our context, a sector’s systemic importance reflects its ability to i) directly impact final demand, ii) indirectly affect the production of downstream firms, and iii) amplify shocks originating in other industries. Notably, our measure encompasses and extends an existing notion of centrality in production networks: producers’ Domar weight. Using US input-output data, we find that Domar weights underestimate sectors’ systemic importance by ≈ 50%, on average, and the extent of underestimation increases with the Domar weight of the sector. Additionally, our measure reveals significant changes in key US industries’ aggregate importance over time despite the relative stability of their Domar weights.
    Keywords: production networks, propagation of sector-level shocks, disaggregated macroeconomic models
    JEL: D24 D5 D57 E23 E32 O41
    Date: 2023–07
  4. By: Yuki Oyama
    Abstract: This study performs an attribute-level analysis of the global and local path preferences of network travelers. To this end, a reward decomposition approach is proposed and integrated into a link-based recursive (Markovian) path choice model. The approach decomposes the instantaneous reward function associated with each state-action pair into the global utility, a function of attributes globally perceived from anywhere in the network, and the local utility, a function of attributes that are only locally perceived from the current state. Only the global utility then enters the value function of each state, representing the future expected utility toward the destination. This global-local path choice model with decomposed reward functions allows us to analyze to what extent and which attributes affect the global and local path choices of agents. Moreover, unlike most adaptive path choice models, the proposed model can be estimated based on revealed path observations (without the information of plans) and as efficiently as deterministic recursive path choice models. The model was applied to the real pedestrian path choice observations in an urban street network where the green view index was extracted as a visual street quality from Google Street View images. The result revealed that pedestrians locally perceive and react to the visual street quality, rather than they have the pre-trip global perception on it. Furthermore, the simulation results using the estimated models suggested the importance of location selection of interventions when policy-related attributes are only locally perceived by travelers.
    Date: 2023–07

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