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on Network Economics |
| By: | Yuntong Wang (Department of Economics, University of Windsor) |
| Abstract: | This paper takes an axiomatic approach to the revenue sharing problem for an airline alliance network. We propose a simple sharing rule that allocates the revenue of each ?ight equally among the carriers of the ?ight. We show that it is the only rule satisfying the axioms of Separability, the Null Airline Property, and Equal Treatment of Equals. We show that the rule coincides with the Shapley value of the game associated with the problem. We provide two extensions of the rule, allowing it to depend on the lengths or the capacities of the ?ight legs. We also consider the maximum revenue problem for the airline alliance. We propose a simple Integer Linear Programming model. We examine its Owen set. Lastly, we provide an algorithm to compute both the optimal solution and the revenue sharing solution given by the simple sharing rule for the maximum revenue problem. |
| Keywords: | Revenue sharing; Airline alliance; Network. |
| JEL: | C71 D70 |
| Date: | 2016–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1605&r=net |
| By: | Adam Clements (QUT); Yin Liao (QUT) |
| Abstract: | An understanding of the linkages between assets is important for understanding the stability of markets. Network analysis provides a natural framework within which to examine such linkages. This paper examines the impact of firm specific news arrivals on the interconnections at an individual firm and overall portfolio level. While a great deal of research has focused on the impact of news on the volatility of a single asset, much less attention has been paid to the role of news in explaining the links between assets. It is found that the both the volume of news and its associated sentiment are important drivers the connectedness between individual stocks and the overall market structure. Firms that experience negative news arrivals during periods of market stress become more centrally important in the market structure. |
| Keywords: | Networks, news, volatility, sentiment |
| JEL: | C22 G00 |
| URL: | http://d.repec.org/n?u=RePEc:qut:auncer:2016_01&r=net |
| By: | Leon Rincon, C.E. (Tilburg University, Center For Economic Research); Martínez, Constanza; Cepeda, Freddy |
| Abstract: | We implement a modified version of DebtRank, a measure of systemic impact inspired in feedback centrality, to recursively measure the contagion effects caused by the default of a selected financial institution. In our case contagion is a liquidity issue, measured as the decrease in financial institutions’ short-term liquidity position across the Colombian interbank network. Concurrent with related literature, unless contagion dynamics are preceded by a major –but unlikely- drop in the short-term liquidity position of all participants, we consistently find that individual and systemic contagion effects are negligible. We find that negative effects resulting from contagion are concentrated in a few financial institutions. However, as most of their impact is conditional on the occurrence of unlikely major widespread illiquidity events, and due to the subsidiary contribution of the interbank market to the local money market, their overall systemic importance is still to be confirmed. |
| Keywords: | financial networks; contagion; default; liquidity; DebtRank |
| JEL: | G21 L14 C63 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:c49d4eff-9bfd-4a01-af6f-7af97ef07584&r=net |
| By: | Leon Rincon, C.E. (Tilburg University, Center For Economic Research); Sarmiento, M. |
| Abstract: | We examine how liquidity is exchanged in different types of Colombian money market networks (i.e. secured, unsecured, and central bank’s repo networks). Our examination first measures and analyzes the centralization of money market networks. Afterwards, based on a simple network optimization problem between financial institutions’ mutual distances and number of connections, we examine the tradeoff between liquidity risk and counterparty risk. Empirical evidence suggests that different types of money market networks diverge in their centralization, and in how they balance counterparty risk and liquidity risk. We confirm an inverse and significant relation between counterparty risk and liquidity risk, which differs across markets in an intuitive manner. We find evidence of liquidity cross-underinsurance in secured and unsecured money markets, but they differ in their nature. Central bank’s role in mitigating liquidity risk is also supported by our results. |
| Keywords: | liquidity risk; counterparty risk; network; centralization; money market |
| JEL: | D85 E58 L14 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:fa0a957d-4f5b-45dc-9148-a6a76eb1efed&r=net |
| By: | Galina Hale; Tümer Kapan; Camelia Minoiu |
| Abstract: | We study the transmission of financial sector shocks across borders through international bank connections. For this purpose, we use data on long-term interbank loans among more than 6,000 banks during 1997-2012 to construct a yearly global network of interbank exposures. We estimate the effect of direct (first-degree) and indirect (second-degree) exposures to countries experiencing systemic banking crises on bank profitability and loan supply. We find that direct exposures to crisis countries squeeze banks' profit margins, thereby reducing their returns. Indirect exposures to crisis countries enhance this effect, while indirect exposures to non-crisis countries mitigate it. Furthermore, crisis exposures have real effects in that they reduce banks' supply of domestic and cross-border loans. Our results, based on a large global sample, support the notion that interconnected financial systems facilitate shock transmission. |
| Keywords: | International banking;External shocks;Financial crises;Banks;Profits;Loans;Financial sector;shock transmission, long-term interbank exposures, systemic banking crises, financial networks, syndicated loans |
| Date: | 2016–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:16/91&r=net |
| By: | OBASHI Ayako (University of Wisconsin and Keio University); KIMURA Fukunari (Keio Univeristy and Economic Research Institute for ASEAN and East Asia) |
| Abstract: | China, Japan, and Korea have been the three largest players in East Asian machinery production networks. This paper employs a new method of analysing finely disaggregated international trade data that applies the concept of zero trade flows, least-traded goods, and intensive/extensive margins of trade growth and scrutinises changes in the roles of China, Japan, and Korea in machinery production networks between 2007 and 2013. We find, first, that China became a dominant player in global machinery production networks in terms of both export values and the diversity and density of product-destination pairs. Second, the growth of Korea as machinery parts and components supplier was also salient and Korea’s dependency on China rose sharply. Third, Japan continued to stagnate and machinery production links between Korea and Japan weakened substantially.Length: 33 pages. |
| Keywords: | zero trade; intensive and extensive margins; least-traded goods; productdestination pairs; machinery industry; parts and components trade |
| JEL: | F14 F23 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2016-10&r=net |
| By: | Sang-Chul Suh (Department of Economics, University of Windsor); Yuntong Wang (Department of Economics, University of Windsor) |
| Abstract: | We consider a pollution permit sharing problem in which a ?nite number of countries, each identi?ed by a unique technology that transforms the pollution permits into an output, share a given amount of permits. We de?ne a Pollution Permit Sharing (PPS) game that assigns to each coalition of countries the maximal value of output they can generate collectively with their technologies and permits available to them. We show that the game is totally balanced. We also show that, for the well-known Cap and Trade (CAT) mechanism, namely the competitive equilibrium allocation which generates an efficient allocation of the permits, its corresponding (net) output distribution is in the core of the PPS game. We consider two other coalitional games whose de?nitions depend on the availability of either the total permits or the technologies. The Aspiration Upper Bound with given Permits (AUBP) game assigns to each coalition the maximal value they can generate by using the technologies available from all countries, but only with the permits available to the coalition. And the Aspiration Upper Bound with given Technologies (AUBT) game assigns to each coalition the maximal value they can generate using only the technolo-gies available to the coalition with the permits available from all countries. We show that the core of the AUBP game is nonempty. More importantly, we show that the competitive equilibrium allocation violates the above two aspiration upper bound restrictions. Finally, we suggest the Shapley value as one of the possible alternative solutions to the permit sharing problem. |
| Keywords: | Pollution Permits; Cap and Trade; Cooperative Games; Aspiration Upper Bounds. |
| JEL: | C71 D60 Q20 |
| Date: | 2016–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1604&r=net |
| By: | Marcelo Arbex (Department of Economics, University of Windsor); Sydney Caetano (Faculdade de Economia, Universidade Federal de Juiz de Fora); Dennis O'Dea (Department of Economics, University of Washington) |
| Abstract: | This paper modifies the standard labor market search model with social networks. Labor market networks is an important job information transmission channel and the complementarity of network and direct search by the unemployed amplify the economy's short-run response to a technological shock. We show that network search has important quantitative consequences for the business cycle, in particular, for output and unemployment. |
| Keywords: | Business Cycles; Labor Markets; Social networks; Job search. |
| JEL: | D85 E24 E32 J64 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1603&r=net |