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on Network Economics |
| By: | Matteo Bizzarri |
| Abstract: | This paper models firm-to-firm trade in a production network as a set of double auctions. Firms have multilateral market power, namely, can affect prices in both input and output markets. The size and division of surplus are endogenous and depend only on technology, network position, and consumer preferences. The standard simplifying assumption of price-taking on input markets (unilateral market power) has systematic effects: it underestimates the final price and overestimates the surplus going upstream. These phenomena affect the model predictions for the welfare impact of mergers. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.21932 |
| By: | Joseph Marshall |
| Abstract: | This paper studies how to estimate an individual's taste for forming a connection with another individual in a network. It compares the difficulty of estimation with and without the assumption that utility is transferable between individuals, and with and without the assumption that regressors are symmetric across individuals in the pair. I show that when pair-specific regressors are symmetric, the sufficient conditions for consistency and asymptotic normality of the maximum likelihood estimator that assumes transferable utility (TU-MLE) are also sufficient for the maximum likelihood estimator that does not assume transferable utility (NTU-MLE). When regressors are asymmetric, I provide sufficient conditions for the consistency and asymptotic normality of the NTU-MLE. I also provide a specification test to assess the validity of the transferable utility assumption. Two applications from different fields of economics demonstrate the value of my results. I find evidence of researchers using the TU-MLE when the transferable utility assumption is violated, and evidence of researchers using NTU-model-based estimators when the validity of the transferable utility assumption cannot be rejected. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.25641 |
| By: | Giuseppe C. Calafiore |
| Abstract: | In the context of containment of default contagion in financial networks, we here study a regulator that allocates pre-shock capital or liquidity buffers across banks connected by interbank liabilities and common external asset exposures. The regulator chooses a nonnegative buffer vector under a linear budget before asset-price shocks realize. Shocks are modeled as belonging to either an $\ell_{\infty}$ or an $\ell_{1}$ uncertainty set, and the design objective is either to enlarge the certified no-default/no-insolvency region or to minimize worst-case clearing losses at a prescribed stress radius. Four exact synthesis results are derived. The buffer that maximizes the default resilience margin is obtained from a linear program and admits a closed-form minimal-budget certificate for any target margin. The buffer that maximizes the insolvency resilience margin is computed by a single linear program. At a fixed radius, minimizing the worst-case systemic loss is again a linear program under $\ell_{\infty}$ uncertainty and a linear program with one scenario block per asset under $\ell_{1}$ uncertainty. Crucially, under $\ell_{1}$ uncertainty, exact robustness adds only one LP block per asset, ensuring that the computational complexity grows linearly with the number of assets. A corollary identifies the exact budget at which the optimized worst-case loss becomes zero. Numerical experiments on the 8-bank benchmark of \cite{Calafiore2025}, on a synthetic core-periphery network, and on a data-backed 107-bank calibration built from the 2025 EBA transparency exercise show large gains over uniform and exposure-proportional allocations. The empirical results also indicate that resilience-maximizing and loss-minimizing interventions nearly coincide under diffuse $\ell_\infty$ shocks, but diverge under concentrated $\ell_1$ shocks. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.27274 |
| By: | Shota Fujishima |
| Abstract: | This paper examines the latent functional block structure of Japan's production network using interregional input-output data. To isolate non-trivial production linkages, we first estimate a structural gravity model to account for spatial frictions and economic scale, and then apply a weighted stochastic blockmodel (SBM) to the resulting residual network. Because these residual linkages often connect distant regions, the SBM is well suited to grouping region-industry pairs based on their shared macroeconomic roles. The results reveal that even after explicitly filtering out the mechanical effects of geographic proximity, the network is organized into functional blocks that maintain a high degree of regional coherence. Beyond this baseline spatial clustering, we find evidence of cross-regional integration, a structural bifurcation between manufacturing and urban services in metropolitan areas, and broadly spanning primary sectors. These findings provide a network-based perspective on regional coordination, offering guidance for how structurally defined production blocks-rather than simple geographic proximity-can inform wide-area policy design. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.25300 |
| By: | Wayne Gao |
| Abstract: | Normalization is ubiquitous in economics, and a growing literature shows that ``normalizations'' can matter for interpretation, counterfactual analysis, misspecification, and inference. This paper provides a general framework for these issues, based on the formalized notion of modeling equivalence that partitions the space of unknowns into equivalence classes, and defines normalization as a WLOG selection of one representative from each class. A counterfactual parameter is normalization-free if and only if it is constant on equivalence classes; otherwise any point identification is created by the normalization rather than by the model. Applications to discrete choice, demand estimation, and network formation illustrate the insights made explicit through this criterion. We then study two further sources of fragility: an extension trilemma establishes that fidelity, invariance, and regularity cannot simultaneously hold at a boundary singularity, while a normalization can itself introduce a coordinate singularity that distorts the topological and metric structures of the parameter space, with consequences for estimation and inference. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.27762 |
| By: | Mitja Devetak; Antoine Mandel |
| Abstract: | A number of recent contributions have put forward the topological structure of production networks as a key determinant of macro-economic dynamics. However, firm-to-firm production networks data is generally not available. Against this background, reconstruction method based on firms' size have been developed. This paper enriches this set of reconstruction methods by integrating input-output sectoral flows in the reconstruction process. We derive analytical expressions for the maximum entropy solutions to the firm network reconstruction problem with sectoral input-output constraints, first for binary networks and then for weight reconstruction. We perform a numerical analysis comparing standard and input-output based reconstruction methods using Hungarian production network data. Our results show that adding input-output constraints substantially reduces deviations from the input-output structure compared with standard methods. Our augmented method provides an almost perfect fit to input-output data, though all methods have difficulties reproducing other structural characteristics. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.21895 |
| By: | Chochua, Lasha; Lake, James; Willmann, Gerald |
| Abstract: | We show that plurilateral agreements facilitate global tariff liberalization by creating an MFN-based margin of cooperation that leaves preferential access via preferential trade agreements (PTAs) unchanged. In a model of endogenous trade agreement formation with farsighted governments, PTAs become rigid once exclusion or freeriding incentives bind, constraining further PTA expansion. Plurilateral agreements relax these constraints by allowing countries to liberalize selectively in a differentiated goods sector without altering existing PTAs. As a result, the stable equilibrium trade network consists of the PTAs that would arise absent plurilaterals, augmented - but not replaced - by plurilateral MFN liberalization. This mechanism provides an explanation for the growing role of sectoral plurilateral agreements within the WTO as preferential liberalization becomes increasingly constrained. |
| Keywords: | Plurilateral Agreements, Preferential Trade Agreements, Global Free Trade, WTO |
| JEL: | F12 F13 F15 F18 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:339613 |
| By: | Aditya Humnabadkar |
| Abstract: | Network analysis of inter-industry payment flows reveals structural economic relationships invisible to traditional bilateral measurement approaches, with significant implications for real-time economic monitoring. Analysing 532, 346 UK payment records (2017--2024) across 89 industry sectors, we demonstrate that graph-theoretic features which include centrality measures and clustering coefficients improve payment flow forecasting by 8.8 percentage points beyond traditional time-series methods. Critically, network features prove most valuable during economic disruptions: during the COVID-19 pandemic, when traditional forecasting accuracy collapsed (R2} falling from 0.38 to 0.19), network-enhanced models maintained substantially better performance, with network contributions reaching +13.8 percentage points. The analysis identifies Financial Services, Wholesale Trade, and Professional Services as structurally central industries whose network positions indicate systemic importance beyond their transaction volumes. Network density increased 12.5\% over the sample period, with visible disruption during 2020 followed by recovery exceeding pre-pandemic integration levels. These findings suggest payment network monitoring could enhance official statistics production by providing leading indicators of structural economic change and improving nowcasting accuracy during periods when traditional temporal patterns prove unreliable. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.02068 |
| By: | Sehara, Arusi (Monash University) |
| Abstract: | This thesis studies the economic coordination barriers that constrain the decarbonisation of maritime transport. Ships powered by alternative fuels lack refuelling infrastructure, creating a coordination failure that locks the sector into carbon dependence. We develop a spatial framework integrating a constrained optimisation problem with global vessel movement data to quantify the minimum infrastructure required to sustain existing trade flows under alternative-fuel adoption. Using AIS observations, tanker and cargo movements are reconstructed into directed networks, each coarsened into roughly 100 high-traffic hubs, and subsequently merged into a unified network for optimisation. The model is solved under two rollout strategies: an optimal rollout, which minimises infrastructure at each adoption level, and a monotone rollout, which captures the irreversibility of infrastructure investments by enforcing cumulative path dependence. Results show (1) geographically uneven adoption, with the earliest hub activations concentrated in East Asia and later entry elsewhere ; (2) cargo vessels transition to alternative fuels earlier than tankers ; and (3) outcomes are consistent across rollout strategies |
| Keywords: | Maritime decarbonisation ; Alternative fuels ; Infrastructure planning ; Network optimisation ; Coordination failure ; Spatial economics. JEL classifications: Q54 ; Q55 ; L91 ; R42 ; Q42 ; C61 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:wrkesp:96 |
| By: | Mohamed Bouka; Moulaye Abdel Kader Ould Moulaye Ismail |
| Abstract: | Small, trade-dependent economies often exhibit limited maritime connectivity, yet empirical evidence on the structural configuration of their container systems remains limited. This study analyzes route concentration and node distributions in Mauritania's maritime container system during 2019-2022 using shipment-level data measured in forty-foot equivalent units (FFE). Routes, origin nodes, destination nodes, and industries are represented as FFE-weighted probability distributions, and concentration and divergence metrics are used to assess structural properties. The results show strong corridor concentration across the seven observed routes (HHI = 0.296), with the top three accounting for approximately 84% of total FFE. Node structures differ by direction: imports are associated with a highly concentrated set of destination nodes (HHI = 0.848), while exports originate from only two origin nodes (HHI = 0.567) and are distributed across a large number of destinations (HHI = 0.053). Industry distributions are more concentrated for exports (HHI = 0.352) than for imports (HHI = 0.096), with frozen fish and seafood accounting for more than 53% of export volume. Temporal analysis shows that route concentration remains stable over time (HHI ~ 0.293-0.303), while node distributions exhibit measurable variation, particularly for export destinations (JSD ~ 0.395) and import origins (JSD ~ 0.250). |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.25678 |
| By: | Marina Gertsberg; Michaela Pagel; Ekaterina Volkova; Valeria Volkova |
| Abstract: | The Epstein files, released between September 2025 and January 2026, offer an unprecedented window into the social and professional network of a convicted sex offender whose ties extended deep into corporate America. We construct a comprehensive sample of all S&P 500 CEOs and board members serving between 2006 and 2026 - 52, 266 unique individuals - and search the 1, 293, 753 text-bearing documents for evidence of their contact with Jeffrey Epstein. Using large language model (LLM) classification of 117, 394 matched correspondences, we identify 67, 637 that indicate direct contact with 1, 179 S&P 500 CEOs or directors. We then document three main findings. First, firms whose CEOs or board members appeared in Epstein-related news coverage experienced significantly negative cumulative abnormal returns of up to -8.5% over a ten-day window following the January 30, 2026 DOJ release. Second, adding Epstein-mediated ties to the firm network increases overall density and reduces average path lengths significantly, meaning that Epstein effectively wired corporate America into a denser, more tightly interconnected governance network than would have existed otherwise. Third, we show that Epstein's network transmitted norm contagion through shared board connections. Firms with more Epstein-connected CEOs or directors exhibit significantly worse ESG outcomes: each additional connection is associated with approximately 2.3 more annual governance incidents and 4.0 more total incidents. |
| Keywords: | Epstein files, connections, networks, corporate governance |
| JEL: | G30 G34 G38 J16 K38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12580 |