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on Network Economics |
| By: | Kor, Ryan; Liu, Yi; Zenou, Yves; Zhou, Junjie |
| Abstract: | We study the optimal joint intervention of a planner who can influence both the standalone marginal utilities of agents in a network and the weights of the links connecting them. The welfare-maximizing intervention displays two key features. First, when the planner’s budget is moderate (yielding interior solutions), the optimal change in link weight between any pair of agents is proportional to the product of their eigen-centralities. Second, when the budget is sufficiently large, the optimal network converges to a simple structure: a complete network under strategic complements, or a complete balanced bipartite network under strategic substitutes. We show that welfare effects are governed by the principal eigenvalue of the network, while distributional outcomes are driven by the dispersion of the corresponding eigen-centralities. Comparing joint interventions to single interventions targeting only standalone marginal utilities, we find that joint interventions consistently generate higher aggregate welfare, but may also increase inequality, revealing a potential trade-off between efficiency and equity. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20401 |
| By: | Patacchini, Eleonora; Wu, Qi |
| Abstract: | We study how face-to-face interactions shape worker mobility through social networks. Using granular cellphone geolocation and sociodemographic data on 3.3 million workers in a large urban labor market, we exploit settings in which multiple friends of the same worker relocate to jobs within the same destination area. Within the same worker and destination, face-to-face interaction with a friend increases the probability of moving to that friend’s workplace by 36-43 percent relative to remote communication, with effects substantially larger than those of phone calls or digital messaging. Consistent with referral models, the effect emerges only after the friend joins the destination firm and disappears in pre-move placebo periods. A data-driven heterogeneity analysis using regularized machine learning reveals a pronounced targeting gradient: effects in the highest predicted-return settings are more than twice as large as the population average. We interpret these findings through a simple referral model in which interaction technology shapes the effectiveness of information transmission, showing that mobility depends not only on the presence of social ties but on how information flows within them. |
| Keywords: | Employment; Communication technology; Agglomeration economies |
| JEL: | R23 J60 L15 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20447 |
| By: | Campbell, Arthur; Thornton, D.J.; Zenou, Yves |
| Abstract: | A growing body of empirical evidence reveals a fundamental asymmetry in the diffusion of social behaviors: prosocial behaviors often exhibit strategic substitutability ("bystander effects"), while antisocial behaviors exhibit strategic complementarities ("licensing effects"). Moreover, even a single behavior (e.g., protest participation) can be a complement in some settings and a substitute in others. To unify these findings, we develop a model of strategic diffusion on networks with positive (prosocial) or negative (antisocial) spillovers. Our results rely on a novel conception of influence, capturing the causal impact of an individual's adoption on others. Prosocial behaviors are complementary in sparse networks but substitutable in dense ones, while antisocial behaviors exhibit the reverse pattern. Our model predicts that prosocial behaviors emerge continuously, while antisocial behaviors exhibit a discontinuous, sudden emergence. Effective policies can target the network density or perceptions of the extent of spillovers to encourage prosocial behaviors and inhibit antisocial ones. |
| Keywords: | Diffusion |
| JEL: | D43 D85 L13 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20425 |
| By: | Wenjie Cao; Angel Sanchez; Boyu Zhang |
| Abstract: | Real social and economic networks involve individuals with diverse incentives, yet most studies of network games assume homogeneous preferences or few player types. We introduce a general framework for binary choice network games with fully heterogeneous payoff structures. We first show that any such game can be transformed into an equivalent one with conformist, rebel, and stubborn archetypes, preserving equilibria and best response trajectories. We then establish sufficient conditions for pure strategy Nash equilibrium existence and convergence of best response dynamics on arbitrary networks, while proving that equilibria almost surely vanish in large sparse random networks. We further develop a deterministic approximation approach that predicts evolutionary trends and equilibrium strategy frequencies from network homophily and heterophily patterns, without computing equilibria explicitly. Extending the framework to limited information, we prove that dynamics converge either to a unique limited information equilibrium or to a unique stationary distribution, and we derive necessary and sufficient conditions for the existence of the limited information equilibrium. We validate our predictions using Prisoner's Dilemma games on real social networks that incorporate heterogeneous altruism and peer influence. These findings together provide a unified framework for equilibrium existence, evolutionary dynamics, and equilibrium outcome prediction in heterogeneous network games. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.05932 |
| By: | Campbell, Arthur; Leister, Matthew; Ushchev, Philip; Zenou, Yves |
| Abstract: | We develop a simple model of content filtering-the tendency of individuals to selectively forward information that aligns with their ideological preference-to study how network structure shapes the distribution of political content. In our framework, individuals and content are horizontally differentiated into three types (left, middle, right). We show that content filtering can amplify the middle or the extremes and may result in only centrist content (full moderation) or only extreme content (full polarization). The outcome depends on the interaction between two forces: a preference advantage from the relative prevalence of types in the population, and a pairwise comparison advantage that systematically favors centrist content. Network density plays a critical role. Sparse networks robustly yield moderation, even when extreme types dominate the population, while dense networks replicate the population's type distribution. Intermediate densities generate non-monotonic comparative statics, including sharp transitions between moderation and polarization. These findings complement existing empirical results that emphasize the types of connections individuals have on social media by highlighting how the number of connections, holding their composition fixed, may fundamentally shape the information environment in ways that foster/mitigate populism and polarization. |
| JEL: | D83 D85 L83 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20729 |
| By: | Weiming Li; Jing Sun; Xinxi Song; Bin Wu |
| Abstract: | We study how interoperability reshapes competitive price discrimination when consumers are embedded in a social network. Two differentiated platforms set personalized prices; consumers benefit from neighbors' consumption of the same platform and, under interoperability, of the rival. Equilibrium prices obtain in closed form for arbitrary networks and contain a network-position term, proportional to Katz-Bonacich centrality, whose sign is determined by whether interoperability exceeds product substitutability. Below this threshold, platforms contest central consumers and grant centrality discounts; above it, central consumers become gateways to a shared cross-platform network and pay premia; at the threshold, prices are independent of network position. Interoperability softens price competition, can make platforms favor denser consumer networks, and reverses which side of the market gains from price discrimination. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.09269 |
| By: | Shan Pei; Wenjie Cao; Boyu Zhang |
| Abstract: | In this paper, we analyze a multi-strategy network game with three types of players, conformists, rebels, and stubborn agents. Conformists adopt the strategy that is most common among their neighbors, rebels adopt the least common, and stubborn agents adhere to a fixed strategy. We study the existence and structure of pure strategy Nash equilibrium (PNE). On arbitrary networks, we establish sufficient conditions for PNE existence, and we prove that in large random networks PNE almost surely fails to exist. For several specific network architectures, such as complete network, lines, rings, trees, and stars, we derive necessary and sufficient conditions for PNE existence and fully characterize the equilibrium strategy frequencies. Collectively, these results offer a unified perspective that PNE is likely to exist when every conformist has more conformist and stubborn neighbors, and fails when the network game has numerous conformist-rebel edges. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.10997 |
| By: | Bigoni, Maria; Camera, Gabriele; Gallo, Edoardo |
| Abstract: | Globalization offers unparalleled opportunities to expand welfare through cooperation across large networks of unrelated individuals. Social exclusion – permanent or temporary – and monetary exchange are institutions that in theory can incentivize cooperation. In an experiment, we evaluate their relative performance and interaction in anonymous networks of different sizes. Permanent social exclusion (ostracism) reduces long-run economic potential by leading to sparse networks. Monetary exchange and temporary social exclusion perform similarly well in small networks. In large networks, however, monetary exchange is the only institution that promotes full cooperation by crowding out ostracism and keeping the network complete. An insight is that monetary systems outperform social exclusion mechanisms in promoting cooperation in globalized social and economic networks. |
| Keywords: | Social exclusion |
| JEL: | C92 E40 D85 C73 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20481 |
| By: | Gebauer, Stefan; Nakov, Anton; Nuño, Galo; Osbat, Chiara; Paz-Pardo, Gonzalo; Paulus, Alari; Quintana, Javier; Valderrama, Maria Teresa; Palazzolo, Alberto |
| Abstract: | The repeated occurrence of supply-chain disruptions since the COVID-19 pandemic reveals the need to complement traditional macroeconomic frameworks with approaches that better capture the complexity of modern economic productionstructures. This paper synthesises the findings of the ChaMP Research Network, highlighting how production network models and heterogeneity across firms, sectors and countries enrich our understanding of monetary policy transmission. Bycapturing input-output relationships between firms and economic sectors, these approaches show how the propagation and persistence of shocks depend on network structure, the position of sectors within the network – where central sectorsexert disproportionate influence – and differences and variations in price and wage flexibility. The inflationary effects of supply shocks tend to be amplified, while the effects of demand shocks, including monetary policy shocks, are dampened. Inaddition, large shocks can give rise to nonlinearities, such as a steepening of the Phillips curve. This aligns with the conclusions of the ECB’s most recent strategy assessment, which emphasise the need to analyse the risks surrounding the inflationoutlook. The findings also point to the emergence of trade-offs between inflation and output gap stabilisation, as production networks and heterogeneity weaken the alignment between price and output dynamics. As a result, stabilising inflation andoutput simultaneously calls for astute fiscal policy. Overall, incorporating production networks provides a more nuanced and policy-relevant framework for designing state-contingent and data-informed monetary policy. JEL Classification: E52, E58, D57, E32 |
| Keywords: | monetary policy transmission, Phillips curve, production networks, sectoral structure, supply chains, supply shocks |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2026392 |
| By: | P. Jean-Jacques Herings; Christian Seel; Arkadi Predtetchinski |
| Abstract: | This paper studies probabilistic properties of pairwise stability for a network model where individual utilities are random variables. We study the probability that a given network is pairwise stable and the expected number of pairwise stable networks. We provide a closed-form solution for the latter number. As the evaluation of the exact expression is computationally challenging for large populations, we provide tractable lower and upper bounds for this expression which allow us to pin down the asymptotic behavior of the expected number of pairwise stable networks up to a multiplicative constant. This asymptotic behavior is described by the number of networks $ 2^{n(n-1)/2} $ times $ (2/n+1)^{n} $, a sequence that tends to infinity fast. We normalize the number of pairwise stable networks by this sequence and show that the variance of the normalized number of pairwise stable networks converges to zero as $ n $ tends to infinity. We conclude that almost surely the number of pairwise stable networks tends to infinity, while the fraction of pairwise stable networks tends to $ 0 $ as $ n $ goes to infinity. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.23440 |
| By: | Jose de Jesus Bernal-Alvarado; David Delepine; Carlos Pinedo Guadarrama |
| Abstract: | We extend the persistent homology analysis of~\paperone{} to the full Roman--Byzantine trade network (0--1453\, \textsc{ce}), using 2{, }599 nodes and 4{, }503 trimodal edges calibrated against the \textsc{orbis} Geospatial Network Model. Five results are reported. % (i)~The $H_t{=}0$ western sub-network result of~\paperone{} is a data-coverage artifact: with full western representation ($N_{\rm west}=987$, $\beta_1\approx52$ cycles per decade) a baseline East--West entropy gap of $+2.22$ units is present from 0\, \textsc{ce} and grows at $+3.3\times10^{-3}$\, yr$^{-1}$, predating the Theodosian partition by four centuries. % (ii)~A \emph{hub-selection artifact} in degree-heterogeneous networks can reverse the sign of the inferred Phase~III slope, requiring full-coverage or stratified sampling for reliable structural-break detection. % (iii)~Decomposing Byzantine resilience into geographic ($H_{\rm geo}$) and economic ($H_{\rm eco}$) components reveals a peak decoupling ratio $R_d = H_{\rm eco}/H_{\rm geo} = 47.7$ at 620\, \textsc{ce}, falling to 13.9 at 640\, \textsc{ce}, quantifying the McCormick--Ward-Perkins historiographical debate as a contrast between two network layers operating on different timescales. % (iv)~The inter-decade $W_2$ Wasserstein velocity identifies the Late Roman--Early Byzantine transition (495\, \textsc{ce}) as the highest topological-velocity event of the 1, 453-year record; the cross-network Wasserstein ratio increases by $150$--$300\times$ after the Chrysobull of 1082\, \textsc{ce}, providing an independent diagram-space analogue of $R_d$. Both the Western collapse (476\, \textsc{ce}) and the Byzantine endpoint (1453\, \textsc{ce}) occur at $H^{\ast}\approx0.524$, interpreted as a candidate topological percolation threshold. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.05695 |
| By: | Imran Ansari; Shashi Jain; Srikanth K. Iyer |
| Abstract: | Empirical correlation matrices estimated from financial return time series are contaminated by statistical noise arising from finite sample size, obscuring genuine interactions among assets. We apply spectral decomposition to separate the empirical correlation matrix into a structured component associated with eigenvalues exceeding the Marchenko-Pastur bounds and a random component representing statistical noise. Using daily returns from the NIFTY 200, NIFTY 500, and S&P 500 over 2010-2022, we show that the structured component, constructed from only 10-16 eigenmodes, reproduces the main statistical properties of the full correlation matrix while removing most noise-dominated eigenmodes. Financial networks derived from the structured component exhibit significantly stronger and more stable core-periphery organization than networks constructed from the full or random matrices. Degree-preserving randomization, Kolmogorov-Smirnov, and Wasserstein distance tests confirm a clear statistical separation between structured and random components. We further show that structured networks display pronounced scale-free degree distributions in the Indian markets. As a practical application, portfolios constructed from peripheral assets of the denoised networks consistently outperform portfolios based on unfiltered correlations and standard benchmarks on a risk-adjusted basis, with robustness verified through Monte Carlo subsampling. These results demonstrate that spectral denoising effectively recovers meaningful network structure from noisy financial correlations. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.10297 |
| By: | Federico D. Forte |
| Abstract: | This paper provides the first analysis of credit relationships between financial institutions and firms through the lens of hypergraphs. Unlike traditional network approaches, which rely on pairwise connections, this framework explicitly represents the shared exposure of multiple financial institutions to the same firm as a simultaneous multilateral relationship. The approach is applied empirically to Credit Registry data from the Central Bank of Argentina, covering the period from August 2023 to December 2025 and focusing on commercial loans between banks and firms. Traditional centrality metrics are compared with hypergraph-specific measures to identify systemically relevant institutions. The paper also proposes an adjusted version of H-eigenvector centrality that nonlinearly weights both the centrality of neighboring institutions and each creditor's lending amount, in order to assess the relevance of a bank within the network. The systemic impact of shocking the top-ranked institutions according to each centrality metric is then estimated through an adaptation of the DebtRank algorithm. The results show that the proposed framework identifies institutions with greater shock-amplification capacity, providing a complementary tool for financial supervision and regulation. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.10943 |
| By: | Tadao Hoshino |
| Abstract: | This paper proposes a network-adjusted generalized method of moments (NA-GMM) estimator for social interaction models when the observed network may differ from the true interaction network. NA-GMM is a novel penalized GMM approach that allows the elements of the observed interaction matrix to be modified to improve the fit of the moment conditions. To avoid unrestricted network adjustments, the NA-GMM criterion introduces a penalty on the amount of adjustment. Since NA-GMM does not aim to estimate the true interaction network itself, the estimator generally converges to a pseudo-true parameter. For a linear spatial autoregressive model, we prove that the NA-GMM estimator is consistent for the pseudo-true parameter and is asymptotically normally distributed under general moment misspecification. We also prove that a fixed-weight version of the NA-GMM estimator has a desirable bias reduction property relative to conventional GMM without network adjustment. An empirical application to U.S. county-level COVID-19 infection data demonstrates the usefulness of the proposed method. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.10613 |
| By: | Ghassibe, Mishel; Nakov, Anton |
| Abstract: | Business cycles with pronounced inflation can have sectoral origins and often feature a growing share of price-adjusting firms. Rationalizing such phenomena requires enhancing our modeling toolkit. We do that by building a non-linear equilibrium multi-sector framework featuring a general input-output network and optimal decisions on the timing and size of price adjustments. The interaction of our ingredients creates equilibrium cascades: large movements in aggregates trigger price adjustment decisions on the extensive margin. Following demand shocks, such as monetary interventions, networks dampen cascades, thus slowing down price adjustment decisions and giving central banks substantial power to stimulate the real economy with limited inflationary consequences. In contrast, under supply shocks, networks amplify cascades, leading to fast increases in the frequency of repricing and large inflationary swings. Applied to Euro Area data, the interaction of networks with cascades allows to quantitatively match the surges in inflation and repricing frequency in the post-Covid era. |
| JEL: | E31 E32 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20605 |
| By: | Réka Juhász; Dávid Krisztián Nagy; Claudia Steinwender; Woan Foong Wong |
| Abstract: | Maritime transport remains the backbone of global trade, yet the port and shipping network that carries it has been transformed by containerization and related technological advances. Drawing on newly available granular data—digitized historical shipping records, georeferenced ship movements, and shipment-level routing information — we present five stylized facts on the structure and evolution of the maritime network. Global shipping activity is highly concentrated among a changing line up of dominant top ports even as lower-ranked ports disperse, while state-owned Chinese port terminal operators increasingly account for these global volumes, boosting overall port operations while delivering efficiency gains mostly to Chinese vessels. We use these facts to organize a synthesis of a fast-growing literature: containerization reshaped which port cities could expand, reinforced hub-and-spoke concentration that yields large but localized welfare gains, embedded ports in multimodal networks that amplify the returns to infrastructure, and generated market power, congestion, and environmental costs. Together, this evidence shows how evolving maritime technologies simultaneously deepen global integration and heighten the economic and geopolitical importance of critical nodes in the transport network — and of who controls them. |
| Keywords: | transport networks, ports, international trade, trade costs, containerization, geoeconomics |
| Date: | 2026–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2200 |
| By: | Zaruhi Hakobyan |
| Abstract: | Social-media platforms allocate reach, deciding whose content becomes widely visible. We study this as feed/reference design in a networked coordination game where users track an unknown state, coordinate with others, and hold biased ideal actions. Amplification changes both who receives information and who becomes a salient coordination reference. Making a private signal commonly observed adds a second common signal and removes the usual non-monotonicity of truth-tracking accuracy in public-signal precision; under a broadcast budget, accuracy depends only on total amplified precision. For any finite network and biases, a network intervention's effect on accuracy splits exactly into an information gain and a quadratic bias cost governed by a Katz--Bonacich influence-overlap matrix, yielding an exact source-ranking rule and a closed-form amplification threshold. A reduced-form engagement objective instead favors validating, same-type links, producing more segregated networks and lower accuracy. Amplification's value depends jointly on information, bias propagation, and the platform's objective. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.10228 |
| By: | Menéndez, Luis; Montolio, Daniel; Mueller, Hannes; Slataper, Francesco |
| Abstract: | This article exploits data from a political conflict between language groups to show how political events can rapidly redefine how these groups interact on social media. Leveraging on a unique dataset of 26 million retweets by 120 000 Catalan- and Spanish-speaking Twitter users, we estimate individual exposure to tweets with a network-based model. We then compare two shocks in the same region and year: the Barcelona terror attack and the Catalan independence referendum of 2017. The referendum, and related police violence, triggered a sharp, symmetric jump in retweeting across language groups. The terror attack, by contrast, did not lead to a similar realignment. |
| Keywords: | Social Networks; Polarization |
| JEL: | D74 C55 C45 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20559 |
| By: | De La Croix, David; Scebba, Rossana; Zanardello, Chiara |
| Abstract: | While good ideas can emerge anywhere, it takes a community to develop and disseminate them. In premodern Europe (1084-1793), there were approximately 200 universities and 150 academies of sciences, which were home to thousands of scholars and created an extensive network of intellectual exchange. By reconstructing interpersonal connections that were made via institutional affiliations, we demonstrate how the European academic landscape facilitated the diffusion of ideas and led cities to develop: examples include botanic gardens, astronomical observatories, and Protestantism. Counterfactual simulations reveal that both universities and academies played crucial roles, with academies being particularly effective at connecting distant parts of the network. Moreover, we show that the diffusion of ideas through the network is remarkably resilient, even if we remove key regions such as France or the British Isles. In Europe, ideas gain prominence when they are channeled effectively by powerful institutions. |
| JEL: | N33 O33 I23 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20569 |
| By: | Antonio Cabrales; Wenhao Cheng |
| Abstract: | This paper studies how organizations should jointly design evaluation rules and assign workers when performance depends on both effort and non-discretionary advantage. Agents choose effort in positions linked by a competition network, while their effective advantage depends on own type and spillovers through a second network. The planner chooses both the assignment and the effort weight in evaluation. Equilibrium effort rises with a position's Katz-Bonacich centrality and falls with effective advantage. The optimal evaluation rule generally differs from true output. When effort is more important in production, the planner lowers the effort weight and uses negative assortative assignment to strengthen incentives. When advantage is more important, the planner raises the effort weight and uses positive assortative assignment to exploit spillovers. We also study a constraint requiring assignments to be pairwise stable, which creates an output loss depending on the intensity of competition. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.07280 |
| By: | Mengsi Gao; Demian Pouzo |
| Abstract: | We develop maximal inequalities for empirical processes indexed by graph-dependent observations. Our bounds separate the complexity of the indexing class from two features specific to graph dependence: the geometry of the underlying graph and the cost of coupling graph-separated blocks to independent copies. The coupling construction combines a novel graph-adapted dependence coefficient with a coloring of a block partition. We specialize the results to graphs with polynomial and exponential growth and to directed dyadic graphs. We then derive Glivenko--Cantelli results and characterize the associated effective sample size. A central implication is that graph-dependent empirical processes need not exhibit a generic root-$n$ rate: convergence is jointly determined by function-class complexity, graph geometry, and the decay of dependence with graph distance. Finally, we apply the results to obtain uniform laws of large numbers for network autoregressive models, nonlinear local-propagation models, and treatment-interference settings. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.31936 |
| By: | David Levinson (TransportLab, School of Civil Engineering, University of Sydney) |
| Abstract: | Induced demand is usually interpreted as additional capacity reducing generalized cost and producing more travel. When a network exhibits Braess's paradox, an added link raises user-equilibrium cost, and we would thus expect demand to fall. I show this in Braess's original four-node numerical network with linear link costs and inverse demand. In the default case, the added link raises elastic equilibrium cost from 70.14 to 80.00 and reduces demand from 3.66 to 3.33. The reported 143-point sweep maps the Braess region in inverse-demand space; no sign-inconsistent cells appear. The accompanying browser implementation reproduces the reported comparison and sweep. |
| Keywords: | Braess Paradox, induced demand, elastic demand, latent demand, user equilibrium, network design |
| JEL: | R40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:nex:wpaper:paper-2026-17 |
| By: | Ashwin Bhattathiripad; Vipin P Veetil |
| Abstract: | Economic power in international trade is the capacity of one country to impose loss on another by withdrawing from a trading relationship. This paper measures it. A model of the short run represents each trade restriction as a pattern of barred entries in the world matrix of input shares and maps it into a vector of losses by country and sector. The asymmetry between the two countries' losses under the same severance is the measure of power: a gap in substitution, since a buyer's dependence turns on how easily it finds another source and a seller's on how easily it finds another market. When a relationship is barred, buyers lean on alternative suppliers and barred suppliers on alternative buyers already present in the benchmark network, under the ceiling that no producer exceeds its pre-shock scale. The reallocation is a RAS balancing of the disrupted matrix that lets \emph{both sides} adjust together. Across 9, 480 counterfactual severances on the 2022 world input--output network, mutual trade dependence is anything but mutual. The average bilateral asymmetry is 0.6 on a scale that runs from balance at zero to complete lopsidedness at one. The United States holds the favorable side in all its relationships, China in all but one. The same tilt runs far down the hierarchy: a severance with Russia would cost Belarus more than a tenth of its economic activity, but Russia only half of one percent. The asymmetry bears only a weak relation to bilateral trade imbalance but closely tracks whether a country sits at the core or the periphery. Power is a property of network position, not deficits. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.09990 |
| By: | Chikis, Craig A.; Kleinman, Benny; Prato, Marta |
| Abstract: | Most U.S. innovation output originates from firms that operate R&D facilities across multiple local markets. We study how this geographic structure influences aggregate innovation and growth, and whether it is socially optimal. First, we develop an endogenous growth model featuring multi-market innovative firms that generate knowledge spillovers to geographically proximate firms. In equilibrium, firms may operate in too few or too many local markets, depending on how sensitive the local spillovers they generate are to their local size. Second, to quantify these effects, we link the model to data on firms’ R&D locations, patents, and citation networks. Using an event-study design, we show that firms’ spatial expansion increases spillovers to other firms and estimate how these spillovers depend on a firm’s local footprint. Our estimates imply that U.S. innovative firms operate in too few markets relative to the social optimum. Third, using quantitative counterfactuals, we find that policies promoting broader spatial scope yield larger welfare gains than standard R&D subsidies. Moreover, unlike R&D subsidies, such policies can also reduce regional inequality. |
| Keywords: | Innovation |
| JEL: | O30 O40 R10 L10 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20408 |
| By: | Szeidl, Adam |
| Abstract: | Firms in developing countries often stay small and fail to upgrade. A possible explanation is barriers to accessing suppliers and clients in the production network. I present an industry equilibrium model of improving firm-to-firm access, and use this model to review and organize the existing evidence. The model makes four predictions, all of which are consistent with evidence. (1) Improving access improves business performance. (2) Improving access can both expand and reallocate the production network. The former is associated with positive indirect effects, the latter with negative indirect effects. (3) Accounting for these indirect effects, access can generate large aggregate gains. (4) A range of frictions, both external and internal to the firm, imply that private markets often under-provide firm-to-firm access. I conclude by discussing open questions. |
| JEL: | O12 O14 O33 L14 L23 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20755 |
| By: | Tianhang Lu; Han Xiao; Qizhi Fang |
| Abstract: | We study flow games with public arcs, an extension of classical cooperative flow games that allows players to use public resources. In these games, a coalition corresponds to a set of arcs, while certain arcs, called public arcs, can be used freely by any coalition. The value of a coalition is the maximum flow value achievable using the arcs controlled by the coalition along with the public arcs. These games have significant applications in financial, communication, and supply-chain networks. We investigate two solution concepts, the least core and the nucleolus. Both solution concepts provide principled ways to allocate the value of the grand coalition among individual players. We provide characterizations of the least core of these games. We also give a polynomial-time algorithm to compute the nucleolus when the core is non-empty. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.23288 |
| By: | Alexandros Gelastopoulos |
| Abstract: | Many bipartite social networks exhibit pronounced asymmetries in selectivity and matching opportunities: members of one side can afford to be highly selective, while members of the opposite side are forced to accept less desirable matches. While it is natural to try to explain this asymmetry in terms of the intrinsic characteristics of the two sides or other exogenous factors, here we show that such asymmetries can also emerge endogenously through a feedback process generated by the matching process itself: as one side becomes more selective, the other side is pushed to be less selective due to reduced matching opportunities, and vice versa. We develop a model in which individuals repeatedly form one-to-one matches across two groups and adapt their selectivity to achieve a target matching rate. Using both analytic and numerical methods, we show that when encounters are sufficiently frequent, the unique equilibrium is for one group to be highly selective and the other non-selective. This qualitative outcome holds even for heterogeneous groups with overlapping, almost indistinguishable distributions of target matching rates. The model makes several testable predictions, and it provides a mechanism for behavioral differentiation in repeated matching environments, with applications ranging from online dating to hiring and housing markets. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.31802 |
| By: | Daniela Bubboloni; Stefano Moretti |
| Abstract: | This work addresses the problem of assessing player importance in coalitional settings where the available information concerns the relative strength between pairs of coalitions, rather than the absolute worth of each coalition. We introduce a novel framework that is flexible enough to represent all coalitional pseudo-games and, through the use of coalitional networks, naturally accommodates scenarios with limited or heterogeneous coalition comparisons. Importantly, this framework still enables the computation of semivalues of pseudo-games, such as the Banzhaf and Shapley values, that can be expressed as weighted sums of differences in specific coalition comparisons, thus offering interpretations beyond traditional approaches. Furthermore, for ranking players rather than computing exact numerical attributions, we introduce the concept of a player's score, which simplifies the process of determining rankings based on semivalues, and shifts the perspective from average marginal contribution to average coalitional worth. This turns out to be particularly enlightening for the Banzhaf value. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.31955 |
| By: | Buonanno, Paolo; Cattaneo, Bianca; Lecce, Giampaolo; Mariella, Vitantonio; Ogliari, Laura |
| Abstract: | Administrative boundaries rarely remain stable over time, yet quantitative economic history often treats local units as fixed. As a result, mergers, splits, and redefinitions can generate spurious breaks in historical series and bias long-run analysis. We introduce a general method to construct time-consistent territorial units (TCTUs): municipalities are represented as nodes in a dynamic network linked by documented events, from which stable aggregates can be extracted for any user-specified interval. The method ensures historical comparability while preserving the finest feasible spatial disaggregation. We implement it for Italy, reconstructing the complete history of municipal transformations since unification using official ISTAT records. Applications illustrate how ignoring boundary changes can produce misleading evidence of demographic decline, whereas TCTUs recover coherent trends. A companion open-source tool provides the code for Italian municipalities and can be adapted to other contexts with detailed administrative histories. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20714 |