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on Network Economics |
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Issue of 2017‒08‒06
four papers chosen by Pedro CL Souza Pontifícia Universidade Católica do Rio de Janeiro |
| By: | Pablo Schenone (Arizona State University); Gregory Veramendi (Arizona State University); Javier Donna |
| Abstract: | This paper studies price dispersion in buyer-seller markets using networks to model frictions, where buyers are linked with a subset of sellers and sellers are linked with a subset of buyers. Our approach allows for indirect competition, where a buyer who is not directly linked with a seller affects the price obtained by that seller. Indirect competition generates the central finding of our paper: price dispersion depends on both the number of links in the network and the structure of the network (how links are distributed). Networks with very few links can have no price dispersion, while networks with many links can still support significant price dispersion. We develop a decomposition of the network that characterizes which links are redundant (i.e. have no effect on prices). We show that a particular network structure (Hamiltonian Cycle) with only two links per node has no price dispersion. We then use a theorem from Frieze (1985) to show that this network structure arises asymptotically with probability one in a randomly drawn network, even as the probability of an individual link goes to zero. We also show the finite sample properties of this relationship and find that even small sparse networks can have very little price dispersion. In an application to eBay, we show that our model reproduces the price dispersion seen in the data quite well, and that 35-45 percent of the price dispersion at eBay can be explained by the network structure alone. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:331&r=net |
| By: | Magne Mogstad (University of Chicago); Emmanuel Dhyne (National Bank of Belgium); Ayumu Kikkawa (University of Chicago); Felix Tintelnot (University of Chicago) |
| Abstract: | In this paper we study how international trade affects firm efficiency and real wages in Belgium. Both in our theory and observed data firms trade with each other and external shocks transmit along the firm-to-firm production network. We first document the transmission of external trade shocks in reduced-form equations based on an exogenous network structure. We then develop and estimate a model of firm-to-firm trade, external trade, and endogenous network formation. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:381&r=net |
| By: | Tim Conley (University of Western Ontario); Nirav Mehta (University of Western Ontario); Ralph Stinebrickner (Berea College); Todd Stinebrickner (University of Western Ontario) |
| Abstract: | We develop and estimate a model of study time choices of students on a social network. The model is designed to exploit unique data collected in the Berea Panel Study. Study time data allow us to quantify an intuitive mechanism for academic social interactions: own study time may depend on friend study time. Social network data allow study time choices and resulting academic achievement to be embedded in an estimable equilibrium framework. New data on study propensities allow us to directly address potential sorting into friendships based on typically unobserved determinants of study time. We develop a speci?cation test that exploits the equilibrium nature of social interactions and use it to show that our study propensity measures substantially address endogeneity concerns. We ?nd friend study time strongly a?ects own study time, and, therefore, student achievement. We examine how network structure interacts with student characteristics to affect academic achievement. Sorting on friend characteristics appears important in explaining variation across students in study time and achievement, and determines the aggregate achievement level. |
| Keywords: | Social Networks; Peer Effects; Homophily; Time-use |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:hcuwoc:20177&r=net |
| By: | Erik Heitfield; Gary Richardson; Shirley Wang |
| Abstract: | The initial banking crisis of the Great Depression has been the subject of debate. Some scholars believe a contagious panic spread among financial institutions. Others argue that suspensions surged because fundamentals, such as losses on loans, drove banks out of business. This paper nests those hypotheses in a single econometric framework, a Bayesian hazard rate model with spatial and network effects. New data on correspondent networks and bank locations enables us to determine which hypothesis fits the data best. The best fitting models are ones incorporating network and geographic effects. The results are consistent with the description of events by depression-era bankers, regulators, and newspapers. Contagion - both interbank and spatial - propelled a panic which healthy banks survived but which forced illiquid and insolvent banks out of operations. |
| JEL: | C11 C23 C41 E02 N1 N12 N2 N22 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23629&r=net |