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on Network Economics |
| By: | Daron Acemoglu; Vasco Carvalho; Asuman Ozdaglar; Alireza Tahbaz-Salehi |
| Abstract: | This paper argues that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations. In particular, it shows that, as the economy becomes more disaggregated, the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages. Our main results provide a characterization of this relationship in terms of the importance of different sectors as suppliers to their immediate customers as well as their role as indirect suppliers to chains of downstream sectors. Such higher-order interconnections capture the possibility of cascade effects whereby productivity shocks to a sector propagate not only to its immediate downstream customers, but also indirectly to the rest of the economy. Our results highlight that sizable aggregate volatility is obtained from sectoral idiosyncratic shocks only if there exists significant asymmetry in the roles that sectors play as suppliers to others, and that the sparseness of the input-output matrix is unrelated to the nature of aggregate fluctuations. |
| Keywords: | Business cycle, aggregate volatility, diversification, input-output linkages, intersectoral network, cascades |
| JEL: | C67 D57 E32 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:587&r=net |
| By: | Pradeep Dubey (Center for Game Theory, Stony Brook University); Rahul Garg (Opera Solutions, India); Bernard De Meyer (CERMSEM, Universite Paris 1) |
| Abstract: | There are many situations in which a customer’s proclivity to buy the product of any firm depends not only on the classical attributes of the product such as its price and quality, but also on who else is buying the same product. Under quite general circumstances, it turns out that customers’ influence on each other dynamically converges to a steady state. Thus we can model these situations as games in which firms compete for customers located in a "social network." A canonical example is provided by competition for advertisement on the web. Nash Equilibrium (NE) in pure strategies exist in general. In the quasi-linear version of the model, NE turn out to be unique and can be precisely characterized. If there are no a priori biases between customers and firms, then there is a cut-off level above which high cost firms are blockaded at an NE, while the rest compete uniformly throughout the network. Otherwise there is a tendency towards regionalization, with firms dominating disjoint territories. We also explore the relation between the connectivity of a customer and the money firms spend on him. This relation becomes particularly transparent when externalities are dominant: NE can be characterized in terms of the invariant measures on the recurrent classes of the Markov chain underlying the social network. Finally we consider convex (instead of linear) cost functions for the firms. Here NE need not be unique as we show via an example. But uniqueness is restored if there is enough competition between firms or if their valations of clients are anonymous. |
| Keywords: | Nash equilibrium, Social network, Advertisement on the web |
| JEL: | C7 D2 D4 L1 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1862&r=net |
| By: | Alfonso Rosa García (Universidad de Murcia); Hubert Janos Kiss (Universidad Autónoma de Madrid) |
| Abstract: | We study a coordination problem where agents act sequentially. Agents are embedded in anobservation network that allows them to observe the actions of their neighbors. We find thatcoordination failures do not occur if there exists a sufficiently large clique. Its existence isnecessary and sufficient when agents are homogenous and sufficient when agents differ and theirtypes are private. Other structures guarantee coordination when agents decide in some particularsequences or for particular payoffs. The coordination problem embodied in our game is appliedto the problems of revolts and bank runs. |
| Keywords: | Social networks, coordination failures, multiple equilibria, revolts, bank runs. |
| JEL: | C72 D82 D85 G21 Z13 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2012-12&r=net |
| By: | Sayantan Ghosh; Uwe Jaekel; Francesco Petruccione |
| Abstract: | Financial markets are well known examples of multi-fractal complex systems that have garnered much interest in their characterization through complex network theory. The recent studies have used correlation based distance metrics for defining and analyzing financial networks. In this work the singularity strength is employed to define a distance metric and the existence of hierarchical structure in the Johannesburg Stock Exchange is investigated. The multi-fractal nature of the financial market, which is otherwise hidden in the correlation coefficient based prescriptions, is analyzed through the use of the singularity strength based method. The presence of a super cluster is exhibited in the network which accounts for half of the network size and is homogeneous in the sectoral composition of the South African market. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1205.1710&r=net |