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on Network Economics |
| By: | Dziubiński, M.; Goyal, S.; Zhou, J. |
| Abstract: | We study a two-player model of conflict with multiple battlefields – the novel element is that each of the players has their own network of spillovers so that resources allocated to one battle can be utilized in winning neighbouring battles. There exists a unique equilibrium in which the relative probability of a player winning a battle is the product of the ratio of the centrality of the battlefield in the two respective competing networks and the ratio of the relative cost of efforts of the two players. We study the design of networks and characterize networks that maximize total efforts and maximize total utility. Finally, we characterize the equilibrium of a game in which players choose both networks and efforts in the battles. |
| Date: | 2025–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camjip:2525 |
| By: | Olivier Bochet (Division of Social Science, New York University Abu Dhabi; Center for Behavioral Institutional Design (C-BID), New York University Abu Dhabi); Mathieu Faure (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Yan Long (Huazhong University of Science and Technology, China); Yves Zenou (Monash University, Australia, and CEPR) |
| Abstract: | In contrast to standard economic models, recent empirical evidence suggests that agents often operate based on subjective and divergent views of the competitive landscape. We develop a novel framework in which such imperfections are explicitly modeled through subjective perception networks, and introduce the concept of perception-consistent equilibrium (PCE), in which agents' actions and conjectures respond to the feedback generated by perceived competition. We establish the existence of equilibrium in broad classes of aggregative games. The model typically yields multiple equilibria, including outcomes that feature patterns of localized exclusion. Remarkably, heterogeneity in beliefs induces perceived competition rents-payoff differentials that arise purely from subjective misperceptions. We further show that PCE actions correspond to ordinal centrality measures, with eigenvector centrality emerging as a behavioral benchmark in separable payoff environments. Finally, a graph-theoretic taxonomy of PCEs reveals a hierarchical structure that ranks perceived competition rents. We also give conditions under which a unique stable equilibrium exists. |
| Keywords: | competition, perception-consistent equilibrium, exclusionary equilibria, bounded rationality, ordinal centrality, eigenvector centrality, perceived competition rent |
| JEL: | C72 D43 Z13 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2515 |
| By: | Michel Grabisch (Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, Paris School of Economics); Elena Parilina (Saint Peterburg State University); Agnieszka Rusinowska (Centre d'Economie de la Sorbonne, CNRS, Université Paris 1 Panthéon-Sorbonne, Paris School of Economics); Georges Zaccour (GERAD, HEC Montréal) |
| Abstract: | We investigate a T-stage dynamic network formation game with linear-quadratic payoffs. Players interact through network which they create as a result of their actions. We study two versions of the dynamic game and provide the equilibrium analysis. First, we assume that players sequentially propose links to others with whom they want to connect and choose the levels of contribution for their links. The players have limited total contributions or capacities for forming links at every stage which can differ among players and over time. They cannot delete links, but the principle of natural elimination of links with no contribution is adopted. Next, we assume that the players simultaneously and independently propose links to other players and have overall limited capacities for the whole game, and not for each stage. This means that every player can redistribute the capacity not only over links, but also over time. The equilibrium concept for the first version of the dynamic game is subgame perfect equilibrium, while it is the Nash equilibrium in open-loop strategies for the second version. Both models are illustrated with numerical examples |
| Keywords: | Network Formation Game; Dynamic Linear-Quadratic Game; Farsighted Players; Limited Capacities; Nash Equilibrium |
| JEL: | D85 C73 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:mse:cesdoc:25019 |
| By: | Pasquale Accardo (University of Bath); Adriano Amati (Università Ca' Foscari Venezia); Giovanni Mastrobuoni (Collegio Carlo Alberto; University of Turin; University of Essex) |
| Abstract: | This study uses a unique longitudinal data set on daily museum visits in Northern Italy to investigate how social networks influence leisure consumption. Based on detailed administrative records of museum cardholders, we use repeated joint visits to build a dynamic network of peers. We identify peer effects that exploit exogenous variation in membership prices generated by age-based discounts. We find robust evidence of peer spillovers in both museum attendance and membership renewal, primarily driven by a preference for shared experiences. These results underscore the role of social interactions in shaping leisure demand and support the view that social networks can amplify individual behavior. More broadly, our findings contribute to the understanding of peer dynamics in settings where consumption is inherently social. |
| Date: | 2025–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:eid:wpaper:58191 |
| By: | Atoyan, Vardan; Matevosyan, Diana |
| Abstract: | The growing geopolitical tensions and regional instabilities in Eurasia raise urgent questions about the resilience of trade routes and infrastructure connectivity. This paper applies a graphbased approach to model the EU-Asia trade network and explores Armenia's potential as a transit hub within the framework of the Global Gateway strategy. The authors construct a weighted network of major regional players based on bilateral trade volumes, geographic distances, and route accessibility. In this network, nodes represent key countries, while edges capture trade relationships, with weights reflecting trade intensity and logistical characteristics. Using a set of graph-theoretical metrics, including degree centrality, betweenness centrality, closeness centrality, and eigenvector centrality, the authors assess the country's importance within the network, identifying its position as a potential chokepoint or facilitator of alternative trade routes. Stress-testing scenarios, including border closures, sanctions, or the reopening of previously closed borders, are simulated to evaluate the impact on trade flows and regional logistics. These scenarios simulate the dynamic nature of trade flows, considering disruptions that could reshape existing networks. Results indicate significant shifts in the network structure under stress, highlighting opportunities for Armenia to strengthen its strategic position as an alternative node in critical corridors. |
| Keywords: | Graph, Logistic Network, Eurasian Corridors, Trade, Armenia |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:opodis:328267 |
| By: | Anh D. Do; Sharat Ganapati; Woan Foong Wong; Oren Ziv |
| Abstract: | The majority of global trade moves by sea through hub-and-spoke shipping networks. We investigate the returns to being a hub country by analyzing how transshipment activity shapes trade and supply chains. We show that most US imports---especially from smaller origin countries---are transshipped via key hubs, and transshipment is positively correlated with the hub's product-level trade. Leveraging the indirect shipping network structure to construct an instrument, we find that transshipment increases hubs' imports from origins for which they facilitate trade and exports of downstream goods, highlighting their central role in shaping modern global trade and supply chain dynamics. |
| JEL: | F10 F13 F14 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34361 |
| By: | Chris Muris; Cavit Pakel |
| Abstract: | We study estimation and inference for triadic link formation with dyad-level fixed effects in a nonlinear binary choice logit framework. Dyad-level effects provide a richer and more realistic representation of heterogeneity across pairs of dimensions (e.g. importer-exporter, importer-product, exporter-product), yet their sheer number creates a severe incidental parameter problem. We propose a novel ``hexad logit'' estimator and establish its consistency and asymptotic normality. Identification is achieved through a conditional likelihood approach that eliminates the fixed effects by conditioning on sufficient statistics, in the form of hexads -- wirings that involve two nodes from each part of the network. Our central finding is that dyad-level heterogeneity fundamentally changes how information accumulates. Unlike under node-level heterogeneity, where informative wirings automatically grow with link formation, under dyad-level heterogeneity the network may generate infinitely many links yet asymptotically zero informative wirings. We derive explicit sparsity thresholds that determine when consistency holds and when asymptotic normality is attainable. These results have important practical implications, as they reveal that there is a limit to how granular or disaggregate a dataset one can employ under dyad-level heterogeneity. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.26420 |
| By: | Jiaxing Weng; Haijun Yang; Tongyu Wang |
| Abstract: | This paper introduces a tractable model to study incentive-compatible homophily under both external environments--such as exogenous shocks or policy constraints--and internal micromotives based on interactive attributes. We propose a set of invariants that capture main features of homophily and the well-defined partition dynamics leading to perfect global homophily. The criteria for homophily formation are characterized via isomorphism. Within this framework, we demonstrate the emergence of macro-complementarity coupled with micro-substitution, where local individuals' utility function is nonlinear and submodular. We discuss two types of financial networks and their differences: hierarchical structure emerges from short-term liquidity transactions, whereas core-periphery structure is based on a stock-based perspective. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.09821 |
| By: | Tadao Hoshino |
| Abstract: | This paper develops a sensitivity analysis framework that transfers the average total treatment effect (ATTE) from source data with a fully observed network to target data whose network is completely unknown. The ATTE represents the average social impact of a policy that assigns the treatment to every individual in the dataset. We postulate a covariate-shift type assumption that both source and target datasets share the same conditional mean outcome. However, because the target network is unobserved, this assumption alone is not sufficient to pin down the ATTE for the target data. To address this issue, we consider a sensitivity analysis based on the uncertainty of the target network's degree distribution, where the extent of uncertainty is measured by the Wasserstein distance from a given reference degree distribution. We then construct bounds on the target ATTE using a linear programming-based estimator. The limiting distribution of the bound estimator is derived via the functional delta method, and we develop a wild bootstrap approach to approximate the distribution. As an empirical illustration, we revisit the social network experiment on farmers' weather insurance adoption in China by Cai et al. (2015). |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.14415 |
| By: | Shuige Liu |
| Abstract: | We examine how misinformation spreads in social networks composed of individuals with long-term offline relationships. Especially, we focus on why misinformation persists and diffuses despite being recognized by most as false. In our psychological game theoretical model, each agent who receives a piece of (mis)information must first decide how to react -- by openly endorsing it, remaining silent, or openly challenging it. After observing the reactions of her neighbors who also received the message, the agent then chooses whether to forward it to others in her own chatroom who have not yet received it. By distinguishing these two roles, our framework addresses puzzling real-world phenomena, such as the gap between what individuals privately believe and what they publicly transmit. A key assumption in our model is that, while perceived veracity influences decisions, the dominant factor is the alignment between an agent's beliefs and those of her social network -- a feature characteristic of communities formed through long-term offline relationships. This dynamic can lead agents to tacitly accept and even propagate information they privately judge to be of low credibility. Our results challenge the view that improving information literacy alone can curb the spread of misinformation. We show that when agents are highly sensitive to peer pressure and the network exhibits structural polarization, even if the majority does not genuinely believe in it, the message still can spread widely without encountering open resistance. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.08658 |
| By: | Patricia Gomez-Gonzalez; Maximiliano Jerez-Osses; Vida Maver; Jorge Miranda-Pinto; Jean-Marc Natal |
| Abstract: | Commodities play a central yet often underappreciated role in shaping macroeconomic fluctuations across both advanced economies (AEs) and emerging market and developing economies (EMDEs), with the latter exhibiting greater volatility. This paper examines how the domestic interconnectedness of the commodity sector conditions the transmission of commodity price shocks. Rather than focusing only on sectoral size, we emphasize production linkages, measured by the network-adjusted value-added share (NAVAS) of the commodity sector. Using panel local projections for OECD countries, we show that greater interconnectedness amplifies the positive effects of terms-of-trade gains on consumption while mitigating the negative effects of declines. To interpret these results, we develop a small open economy model with production networks. The model highlights how commodity interconnectedness strengthens wealth channels but dampens real wage channels, shaping the overall macroeconomic response. Our findings underscore the importance of network structures in explaining commodity shock propagation and the heightened volatility observed in EMDEs. |
| Keywords: | Production Networks; Commodity Prices; Network-Adjusted Value- Added Share; Advanced Economies and Emerging Markets |
| Date: | 2025–10–14 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/208 |
| By: | Matthias Burgert; Giulio Cornelli; Burcu Erik; Benoit Mojon; Daniel Rees; Matthias Rottner |
| Abstract: | This paper introduces the BIS Multisector Model (BIS-MS), a dynamic stochastic general equilibrium (DSGE) model for analyzing macroeconomic dynamics in a multi-sector production network. The model can be calibrated to match the input-output data of more than 80 economies, enabling a detailed exploration of sectoral interdependencies and cross-industry shock transmission. By incorporating nominal rigidities at the sectoral level, the model can also be used to evaluate alternative monetary policy strategies. The paper demonstrates the model's capabilities by analyzing temporary and permanent energy price shocks under different monetary policy frameworks. In doing so, it illustrates the critical role of the country-specific production networks in shaping macroeconomic outcomes. The accompanying model toolbox equips policymakers and researchers with an easy-to-access platform for flexible scenario analysis. |
| Keywords: | multisector model, DSGE model, monetary policy, production network, climate change |
| JEL: | C54 E52 H23 Q43 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1297 |