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on Network Economics |
| By: | Mian, Atif; Abid, Qamar; Khwaja, Asim Ijaz |
| Abstract: | We construct the topology of business networks across the population of firms in an emerging economy, Pakistan, and estimate the value that membership in large yet diffuse networks brings in terms of access to bank credit and improving financial viability. We link two firms if they have a common director. The resulting topology includes a "giant network" that is order of magnitudes larger than the second largest network. While it displays "small world" properties and comprises 5 percent of all firms, it accesses two-thirds of all bank credit. We estimate the value of joining this giant network by exploiting "incidental" entry and exit of firms over time. Membership increases total external financing by 16.6 percent, reduces the propensity to enter financial distress by 9.5 percent, and better insures firms against industry and location shocks. Firms that join improve financial access by borrowing more from new lenders, particularly those already lending to their (new) giant-network neighbors. Network benefits also depend critically on where a firm connects to in the network and on the firm's pre-existing strength. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:hrv:hksfac:4876870&r=net |
| By: | Galtier, F.; Bousquet, F.; Antona, M.; Bommel, P. |
| Abstract: | As the information relative to endowments, costs and preferences is dispersed among many agents, the quality of resource allocation depends on the ability of markets to communicate information inside the economic system. Because information is transferred through negotiation and transaction behaviors, the network of trading relations defines the channels through which it flows. In the present study, we use new computational tools to analyze the performance of two wholesale trade institutions widely used around the world: network trading and marketplace trading. Whilst network trading and marketplace trading disseminate far fewer bits of information than a perfectly transparent benchmark market, they often manage to generate an allocation of resources that is almost as good. In many cases, network trading proves more effective than marketplace trading (contrary to a common preconception). This surprising performance of network trading is linked to a form of indirect arbitrage induced by connections between networks. Implications for market design and public policy making are presented, along with prospects for further research. ...French Abstract : Comme l’information relative aux dotations, aux coûts et aux préférences est dispersée entre de nombreux agents, la qualité de l’allocation des ressources dépend de la capacité des marchés à diffuser de l’information au sein du système économique. Comme cette information est diffusée par les comportements de négociation et d’échange, le réseau des transactions commerciales définit les canaux par lesquels elle circule. Dans la présente étude, nous utilisons des nouveaux outils de simulation informatique pour analyser la performance de deux institutions largement utilisées dans le monde pour le commerce de gros : le commerce en réseau et le commerce sur des places de marché. Bien que ces deux institutions diffusent une quantité d’information beaucoup plus faible qu’un marché parfaitement transparent (institution témoin), elles parviennent à générer une allocation des ressources qui est presque aussi bonne. Dans de nombreux cas, le commerce en réseau s’avère plus efficace que le commerce sur des places de marché (contrairement à une idée très répandue). Cette performance étonnante du commerce en réseau est liée à une forme d’arbitrage indirect induite par les connexions entre réseaux. Ces résultats ont différentes implications pour la conception d’institutions de marché et pour les politiques publiques. Ils ouvrent aussi de nouvelles pistes de recherche. |
| Keywords: | MARKET DESIGN; MARKET PROCESS; INFORMATIONAL EFFICIENCY; AGENT-BASED COMPUTATIONAL ECONOMICS; MULTI-AGENT SYSTEM; DECENTRALIZED MARKET; EFFICIENCE INFORMATIONNELLE; SYSTEMES MULTI-AGENTS; MARCHES DECENTRALISES |
| JEL: | C63 D82 D83 D85 L1 Q13 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:umr:wpaper:201202&r=net |
| By: | Agata Fronczak |
| Abstract: | It is common wisdom that no nation is an isolated economic island. All nations participate in the global economy and are linked together through trade and finance. Here we analyze international trade network (ITN), being the network of import-export relationships between countries. We show that in each year over the analyzed period of 50 years (since 1950) the network is a typical representative of the ensemble of maximally random networks. Structural Hamiltonians characterizing binary and weighted versions of ITN are formulated and discussed. In particular, given binary representation of ITN (i.e. binary network of trade channels) we show that the network of partnership in trade is well described by the configuration model. We also show that in the weighted version of ITN, bilateral trade volumes (i.e. directed connections which represent trade/money flows between countries) are only characterized by the product of the trading countries' GDPs, like in the famous gravity model of trade. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1205.4589&r=net |
| By: | Gabrielle Demange (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | An intricate web of claims and obligations ties together the balance sheets of a wide variety of financial institutions. Under the occurrence of default, these interbank claims generate externalities across institutions and possibly disseminate defaults and bankruptcy. Building on a simple model for the joint determination of the repayments of interbank claims, this paper introduces a measure of the threat that a bank poses to the system. Such a measure, called threat index, may be helpful to determine how to inject cash into banks so as to increase debt reimbursement, or to assess the contributions of individual institutions to the risk in the system. Although the threat index and the default level of a bank both reflect some form of weakness and are affected by the whole liability network, the two indicators differ. As a result, injecting cash into the banks with the largest default level may not be optimal. |
| Keywords: | Contagion ; Systemic risk ; Financial linkages ; Bankruptcy |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00662513&r=net |
| By: | Biliana Alexandrova-Kabadjova; Sara Gabriela Castellanos Pascacio; Alma L. García-Almanza |
| Abstract: | We investigate the payment card's adoption rate under consumers' and merchants' awareness of network externalities, given two levels of Interchange Fees in a multiagent card market. For the purpose of our research, in multiple instances of the model (scenarios) the investigated effects are analyzed over the complete process of adoption, until the market's saturation point is achieved. For each scenario, a comparison is made between two different levels of Interchange Fees and different degrees of consumers' and merchants' awareness. We model explicitly the interactions between consumers and merchants at the point of sale. We allow card issuers to charge consumers with fixed fees and provide net benefits from card usage, whereas acquirers can charge fixed and transactional fees to merchants. |
| Keywords: | Two-sided markets, financial services, network formation. |
| JEL: | D7 D85 G28 L13 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2012-02&r=net |
| By: | Cilem Selin Hazir (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Corinne Autant-Bernard (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon) |
| Abstract: | This paper studies multilateral cooperation networks among organizations and work on a two-mode representation to study the decision to participate in a consortium. Our objective is to explain the underlying processes that give rise to multilateral collaboration networks. Particularly, we are interested in how heterogeneity in organizations' attributes plays a part and in the geographical dimension of this formation process. We use the data on project proposals submitted to the 7th Framework Program (FP) in the area of Life sciences, Biotechnology and Biochemistry for Sustainable Non-Food. We employ exponential random graph models (p* models) (Frank and Strauss, 1986 ; Wasserman and Pattison, 1996) with node attributes (Agneessens et al., 2004), and we make use of extensions for affiliation networks (Wang et al., 2009). These models do not only enable handling variability in consortium sizes but also relax the assumption on tie/triad independence. We obtained some preliminary results indicating institutional types as a source of heterogeneity affecting participation decisions. Also, these initial results point out that organizations take their potential partners' participations in other projects into account in giving their decision ; organizations located in the core European countries tend to participate in the same project ; the tendency to preserve the composition of a consortium across projects and the tendency of organizations with the same institutional type to co-participate are not significant. |
| Keywords: | Multilateral R&D collaboration; affiliation networks; exponential random graph models; geographical dimension of networks; biotechnology |
| Date: | 2012–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00697556&r=net |
| By: | Chiara Fumagalli; Massimo Motta |
| Abstract: | We propose a simple theory of predatory pricing, based on incumbency advantages, scale economies and sequential buyers (or markets). The prey needs to reach a critical scale to be successful. The incumbent (or predator) has an initial advantage and is ready to make losses on earlier buyers so as to deprive the prey of the scale the latter needs, thus making monopoly profits on later buyers. Several extensions are considered, including cases where scale economies exist because of demand externalities or two-sided market effects, and where markets are characterized by common costs. Conditions under which predation may (or not) take place in actual cases are also discussed. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:437&r=net |
| By: | Quoc-Anh Do (School of Economics, Singapore Management University); Yen-Teik Lee (Department of Finance, Lee Kong Chian School of Business, Singapore Management University); Bang Dang Nguyen (Finance and Accounting Group, Judge Business School, University of Cambridge); Kieu-Trang Nguyen (SPEA, Indiana University) |
| Abstract: | This paper investigates the impact of social-network based political connections on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Comparing firms connected to elected versus defeated politicians in the Regression Discontinuity Design of close elections from 2000 to 2008, we provide evidence that political connections enhance firm value. However, the value of political connections varies in a more complex way than expected. While connections to powerful members of the Senate generate strong positive impact on firm value, connections to newly elected congressmen are less valuable to firms than connections to state-level politicians defeated in those elections. As a result, a director’s connection to an elected congressman causes a Weighted Average Treatment Effect on Cumulative Abnormal Returns of -2.65% surrounding the election date. Our results are robust and consistent through various specifications, parametric and nonparametric, with different outcome measures and social network definitions, and across many subsamples. Overall, our study identifies the value of political connections through social networks, uncovers its variation across different politicians’ backgrounds, and stresses the importance of state-level political connections. |
| Keywords: | Corruption; Accountability; Population Concentration; Capital Cities; US State Politics; Media; Turnout; Campaign Contributions; Public Good Provision |
| JEL: | D72 D73 L82 R12 R50 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:siu:wpaper:22-2012&r=net |