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on Network Economics |
| By: | Chengqing Li; Yves Zenou; Junjie Zhou |
| Abstract: | We study an Arrow-Debreu economy with externalities generated by multiplex networks. Market equilibrium prices reflect both the preferences and scarcity of goods, consumers' network centralities arising from goods' externalities, as well as linkages across goods (layers) through the budget constraint. Despite the presence of externalities, competitive markets can still be efficient: the First and Second Welfare Theorems hold if either all networks are regular or all layers share the same network structure. When markets allocate goods inefficiently, a Lindahl equilibrium-implemented through personalized prices-can restore efficiency, but may leave some consumers worse off. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.21117 |
| By: | Langtry, A.; Taylor, S.; Zhang, Y. |
| Abstract: | This paper proposes a new lens for studying threshold games played on networks when the thresholds are heterogeneous. These are games where agents have two possible actions, and prefer action 1 if and only if enough of their neighbours choose action 1. We propose a transformation of the network that 'absorbs' the heterogeneity in thresholds into the network. This allows us to characterise equilibria in terms of the k-core – a well-studied measure of network cohesiveness – of the transformed network. Our model is also the direct analogy to the workhorse model of Ballester et al. [2006] when actions are 0 or 1. Further, our binary action version exhibits a remarkable stability property. When agents have linear-quadratic preferences, the k-core of the transformed network characterises the unique subgame perfect equilibrium of a sequential move version of the game – no matter what order agents move in. |
| Keywords: | Networks, Threshold Games, Strategic Complements, Contagion, Diffusion, Coordination |
| JEL: | D85 O33 |
| Date: | 2026–04–17 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2633 |
| By: | Taylor, S. |
| Abstract: | Who counts as "the same" in a network, and when must they act or be treated identically? Whilst many economic settings are network games, where with whom agents interact shapes their behaviour, this question has remained largely unanswered. I develop a general notion of identical network incentives and use it to organise the analysis of equilibria and interventions in network games. I introduce algebraic tools that leverage network symmetries, which fold the network so that nodes on either side of the fold occupy identical positions. In unique or extremal equilibria, agents with the same network position must take the same action. These equilibria can admit tractable comparative statics. For budget-constrained interventions, symmetries structure how changes in incentives flow through the network, revealing a contrast as the budget grows. With complements in the network externality, total good provision shifts by the same amount amongst similar agents. With substitutes, targeting can fix total good provision by simply redistributing the original total equilibrium action amongst equivalent agents. |
| Date: | 2026–05–11 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2635 |
| By: | Rosche, Benjamin (New York University - Abu Dhabi) |
| Abstract: | Adolescent friendship networks exhibit limited interaction across socioeconomic and racial lines. Using Add Health data and a novel exponential random graph model, this study examines socioeconomic segregation in high school friendships and its relationship to racial segregation. Results show that networks are segregated less by socioeconomic status (SES) than by race, yet low-SES students are excluded from high-SES circles to a similar degree. Crucially, unlike racial segregation, which is mutual, socioeconomic segregation is unilateral: many ties from low-SES to high-SES peers go unreciprocated. A decomposition of determinants shows about 60 percent reflects differences in schools’ socioeconomic composition, while 40 percent arises from within-school friendship choices. Within schools, segregation arises less from SES-stratified courses and extracurriculars than from racial homophily, SES-based popularity differences, and triadic closure. Thus, while between-school compositional differences limit who can meet, within schools, segregation is shaped more by students’ preferences and network processes than by meeting opportunities. |
| Date: | 2026–05–14 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:pu2c4_v2 |
| By: | Köse, Şeyda (Supply Chain Intelligence Institute Austria (ASCII)); Diem, Christian (Institute for New Economic Thinking at the Oxford Martin School); Dervic, Elma (Supply Chain Intelligence Institute Austria (ASCII)); Friesenbichler, Klaus (Supply Chain Intelligence Institute Austria (ASCII)); Heiler, Georg (Supply Chain Intelligence Institute Austria (ASCII)); Hurt, Jan (Supply Chain Intelligence Institute Austria (ASCII)); Picatto, Hernan (Supply Chain Intelligence Institute Austria (ASCII)); Klimek, Peter (Supply Chain Intelligence Institute Austria (ASCII)) |
| Abstract: | The semiconductor industry is foundational to modern technology, yet its complex global multi-relational firm network remains poorly understood, posing challenges to scientists, firms and policymakers. Traditional analysis relies on proprietary databases that are often expensive, incomplete, and slowly updated, limiting their ability to capture rapidly evolving dependencies. Here, we demonstrate that a novel, generalizable methodology combining Large Language Models (LLMs) with open web data can reconstruct this network and its structural dynamics at scale. We identify and classify supply-chain, partnership, and ownership links from 170 million semiconductor firm webpages, yielding a temporal network of over 1, 300 linked firms. We validate link-extraction quality (Precision: 0.884; F1-score: 0.784), network overlap and complementarity with a proprietary database, and consistency with aggregate economic data. Our network reveals a temporary 9% decline in edges during the 2022 chip shortage, rapid increases in the centrality of AI supply-chain bottleneck firms such as NVIDIA, and geographic realignment of interfirm relations amid geopolitical turbulence. This generalizable framework overcomes barriers to transparency and provides essential, up-to-date maps for assessing resilience and informing policy across strategically relevant sectors. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:amz:wpaper:2026-14 |
| By: | Beber, Bernd; Ebert, Cara; Murken, Niklas; Riaz, Zara |
| Abstract: | Out-migration is a common feature of rural life in the Global South, yet its effects on social networks in origin communities remain underexplored. Drawing on original data from nearly 10, 000 households in 145 villages in Senegal, this paper presents observational evidence linking household migration status to social ties in sending areas. Migrant households maintain significantly more local social connections than non-migrant households, driven by stronger ties among migrants and by inward links to migrant households. This heightened connectivity cannot be explained solely by economic resources; instead, it appears to be shaped by non-material factors such as access to information. These findings do not support the hypothesis of disintegration of rural communities due to migration. However, social networks are a central feature of rural life and by shifting attention from destination- to origin-area networks, the paper broadens the understanding of migration's social impacts. |
| Abstract: | Abwanderung ist ein weit verbreitetes Phänomen im ländlichen Raum des Globalen Südens, doch ihre Auswirkungen auf soziale Netzwerke in den Herkunftsgemeinden sind bislang kaum erforscht. Auf der Grundlage von Originaldaten aus fast 10.000 Haushalten in 145 Dörfern im Senegal präsentiert dieser Beitrag Beobachtungsdaten, die einen Zusammenhang zwischen dem Migrationsstatus von Haushalten und den sozialen Bindungen in den Herkunftsgebieten herstellen. Migrantenhaushalte pflegen deutlich mehr lokale soziale Kontakte als Nicht-Migrantenhaushalte, was auf stärkere Bindungen unter Migranten und auf Verbindungen zu Migrantenhaushalten zurückzuführen ist. Diese erhöhte Vernetzung lässt sich nicht allein durch wirtschaftliche Ressourcen erklären, sondern scheint vielmehr durch immaterielle Faktoren wie den Zugang zu Informationen geprägt zu sein. Diese Ergebnisse stützen nicht die Hypothese einer Desintegration ländlicher Gemeinschaften aufgrund von Migration. Soziale Netzwerke sind jedoch ein zentrales Merkmal des ländlichen Lebens, und indem die Aufmerksamkeit von den Netzwerken in den Zielgebieten auf die Netzwerke in den Herkunftsgebieten verlagert wird, erweitert die Studie das Verständnis der sozialen Auswirkungen der Migration. |
| Keywords: | Migration, Network Analysis, Household Networks, Senegal |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwirep:341104 |
| By: | Pang, Raymond; Veraart, Luitgard A. M. |
| Abstract: | We develop a model for financial contagion in collateralized networks in which two channels of fire sales interact. We consider a financial market with multiple assets that can be used for both investment purposes and to satisfy collateral requirements. In our model, a fire sale can be triggered both before default, when illiquid assets are sold to satisfy payment obligations, and after default, when collateral of defaulted institutions is sold. We investigate contagion that arises from the overlap in assets used for investment purposes and as collateral. In particular, we illustrate how fire sales triggered prior to default can reduce the effectiveness of collateralization after a default. Our results highlight the importance of using high-quality assets as collateral to improve financial stability. |
| Keywords: | collateral; financial networks; fire sales; systemic risk |
| JEL: | F3 G3 |
| Date: | 2026–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130723 |
| By: | Robert Ghrist |
| Abstract: | We associate to a decorated liability network a liability sheaf on a directed hypergraph whose hyperedges separate the distribution of payments from the collection of receipts. Clearing configurations are precisely the global sections of this sheaf, and the global-section object is canonically the equalizer of the identity and a clearing operator $\Phi=A\circ D$ factored into collective distribution $D$ and aggregation $A$; an institution-edge duality identifies it equivalently with the equalizer of the dual operator $D\circ A$ on the edge side. This identifies liability clearing as a finite-limit construction in the ambient data category. The construction is functorial under change of coefficient category: a Clearing Invariance Theorem shows that a finite-limit-preserving functor compatible with constraint subobjects induces a canonical isomorphism on global-section objects, enabling uniform comparison of clearing problems across categories of payment data. Existence, uniqueness, and iterative computation of clearing sections are organized by the structure carried on payment objects: Tarski's theorem yields existence and a complete-lattice structure under complete-lattice global elements; Scott continuity refines this to convergent Kleene iteration; an acyclic underlying graph admits a unique clearing section in finitely many steps with no order or metric hypothesis; and Banach's theorem on global elements yields uniqueness under metric contraction. The Eisenberg--Noe model and lattice liability networks arise as special cases. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.15778 |
| By: | Santiago Picasso |
| Abstract: | A stylized factin modern economies is that the more developed a country is, the greater the weight of the service sector.The economics of complexity has provided a new perspective that explains this growth in modern economies.However, thestudy of economic complexity through the standard measure of thecomplexity index presents an increasingly relevant omission in understanding the economic process and its growth.Ingeneral, the data used to measure the EconomicComplexity Index(ECI) are based on information about goods;however, there is a lack of informationon services.This paper proposes an ew methodology to retrieve information on the economic complexity in services.Forthis purpose, the US input-output matrix is used.This work is novel because, thanks to the structure of the data as a network, it is possible to infer them is sing information on the complexity of services. Using a machinelearning method, it ispossible to impute the complexity index for 146services, a level of disaggregation, that is strikingly higher than in other works.The index recovered by this method is consistent with previous results that found service sectors to be more complex than goods.The second result shows that the more restricted the core is in the center of the network, the greater the centrality of services and their complexity.Finally, the results confirm the relevance of the economic complexity index. However, the ECI forservices is better than the ECI for goods for predicting growth;aone-unit increase in the ECI of services increases GDP growth by more than 1 percentage point. |
| Keywords: | Economic Complexity; Services Sector; Input–Output Networks; Machine Learning; k-Nearest Neighbors; Structural Transformation; Economic Growth; Spatial Econometrics |
| JEL: | C45 C55 O11 O14 O47 L80 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ude:wpaper:0126 |
| By: | Jens Gudmundsson; Jens Leth Hougaard; Kohmei Makihara; Alexandros Rigos |
| Abstract: | We study a model in which shocks propagate along a path chosen by agents embedded in a network. When a shock hits an agent, the affected agent cancels one of her outgoing edges. This cancellation cascades sequentially along a chosen path until reaching a terminal agent, resulting in a systemic cost equal to the sum of individual cancellation losses. A liability rule determines agent payments for realized losses, and we seek to implement efficient path selection in the induced sequential-move game. Our main axiomatic result characterizes a family of rules, which set each agent's liability to be proportional to the system's total realized losses with agent weights depending only on the network structure. We propose a way to set such weights based on a simple path-based procedure that assigns equal importance to all non-sink agents along each path and then aggregates these contributions across paths. These weights coincide with the Shapley value of an associated "path-counting" cooperative game and can be computed in polynomial time. A simulation study illustrates the mechanics of our approach. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.14485 |
| By: | Bahaj, Saleem; Fuchs, Marie; Reis, Ricardo |
| Abstract: | At the end of 2025, there were 177 cross-border liquidity lines between central banks connecting countries that accounted for 81% of world GDP. This paper maps the evolution of these arrangements since 2000. We show that the lines form a network through which banks can indirectly obtain access to the USD even when their central bank has no agreement with the Federal Reserve. These indirect connections give the People’s Bank of China a central role and show the fragility of liquidity provision to geopolitical tensions. We present cross-country evidence that the indirect connections reduce CIP deviations at the tails, and causal evidence that liquidity lines are substitutes to FX reserves. |
| Keywords: | swap lines; capital flow; financial crises; IMF; cross-currency basis |
| JEL: | E44 F33 G15 |
| Date: | 2026–05–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137636 |
| By: | Madjid Eshaghi Gordji; Ali Jabbari; Mohammad Ali Berahman; Esmaiel Abounoori |
| Abstract: | Westudy how a planner can design dynamic interventions to overcome status-quo inertia in living temporal games, where strategic agents control their state (active, sleep, partially dead) on a temporal network. Building on the continuous-time stochastic game framework of our companion paper, we introduce three intervention classes: bounded transfers (price based), structural modifications (edge deletion, addition, or replacement), and information signals. We formalize the notion of inertia depth and prove a threshold theorem: the status quo equilibrium survives all transfer perturbations whose magnitude is below a critical bound that depends on the remaining horizon. A central structural dominance result shows that for any finite transfer budget there exists a family of games where no bounded price intervention can eliminate the inefficient equilibrium, yet a single edge replacement (continuous-flow to discrete-transport) succeeds. We then study private-information subclasses with static types. Using a uniformization reduction, we prove an impossibility result: no direct mechanism can simultaneously satisfy ex post incentive compatibility, ex post budget balance, and history privacy while always implementing an efficient equilibrium. In the same subclass we construct a dynamic pivot mechanism that achieves second-best efficiency with bounded deficit. Finally, we show that replacing continuous-flow edges by discrete-transport edges weakly expands the set of implementable outcomes, highlighting the importance of temporal semantics for mechanism design. Our results extend the static analysis of [5] to continuous time strategic networks and provide a rigorous foundation for subsequent papers on learning and mean-field design. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.19087 |