|By:||Yann Bramoullé (AMSE – Aix-Marseille School of Economics – EHESS – École des hautes études en sciences sociales – Centre national de la recherche scientifique (CNRS) – Ecole Centrale Marseille (ECM) – AMU – Aix-Marseille Université)
Rachel Kranton (Duke University, Department of Economics – Duke University (Durham, USA))
This chapter studies games played on fixed networks. These games capture a wide variety of economic settings including local public goods, peer effects, and technology adoption. We establish a common analytical framework to study a wide game class. We unearth new connections between games in the literature and in particular between those with binary actions, like coordination and best-shot games, and those with continuous actions and linear best replies. We review and advance existing results by showing how they tie together within the common framework. We discuss the game-theoretic underpinnings of key notions including Bonacich centrality, maximal independent sets, and the lowest and largest eigenvalue. We study the interplay of individual heterogeneity and the network and we develop a new notion – interdependence – to analyze how a shock to one agent affects the action of another agent. We outline directions for future research.
A growing literature relies on natural experiments to establish causal effects in macroeconomics. In diverse applications, natural experiments have been used to verify underlying assumptions of conventional models, quantify specific model parameters, and identify mechanisms that have major effects on macroeconomic quantities but are absent from conventional models. We discuss and compare the use of natural experiments across these different applications and summarize what they have taught us about such diverse subjects as the validity of the Permanent Income Hypothesis, the size of the fiscal multiplier, and about the effects of institutions, social structure, and culture on economic growth. We also outline challenges for future work in each of these fields, give guidance for identifying useful natural experiments, and discuss the strengths and weaknesses of the approach.
|Keywords:||Civic Capital; Fiscal Multiplier; Institutions; Multiple Equilibria; Networks; Permanent Income Hypothesis; Social Structure; Social Ties; Trust|
|JEL:||C1 C9 E21 E62 H31 O11 O14 O43 O50|
The bilateral trade relations between world countries form a complex network, the International Trade Network (ITN), which is involved in an increasing number of worldwide economic processes, including globalization, integration, industrial production, and the propagation of shocks and instabilities. Characterizing the ITN via a simple yet accurate model is an open problem. The classical Gravity Model of trade successfully reproduces the volume of trade between two connected countries using known macroeconomic properties such as GDP and geographic distance. However, it generates a network with an unrealistically homogeneous topology, thus failing to reproduce the highly heterogeneous structure of the real ITN. On the other hand, network models successfully reproduce the complex topology of the ITN, but provide no information about trade volumes. Therefore macroeconomic and network models of trade suffer from complementary limitations but are still largely incompatible. Here, we make an important step forward in reconciling the two approaches, via the introduction of what we denote as the Enhanced Gravity Model (EGM) of trade. The EGM combines the maximum-entropy nature of network models with the established econometric structure of the Gravity Model. Using a single, unified and principled mechanism that is transparent enough to be generalized to other economic networks, the EGM allows trade probabilities and trade volumes to be separately controlled via any combination of dyadic and country-specific macroeconomic variables. We show that the EGM successfully reproduces both the topology and the weights of the ITN, finally reconciling the conflicting approaches. Moreover, it provides a general and simple theoretical explanation for the failure of economic models that do not explicitly focus on network topology: namely, their lack of topological invariance under a change of units.
Rojo Arjona, David
Van Leeuwen, Boris
We investigate the effects of power on cooperation in repeated social dilemma settings. Groups of five players play either multi-player trust games or VCM-games on a fixed network. Power stems from having the authority to allocate funds raised through voluntary contributions by all members and/or from having a pivotal position in the network (centrality). We compare environments with and without ostracism by allowing players in some treatments to exclude others from further participation in the network. Our results show that power matters but that its effects hinge strongly on the type involved. Reminiscent of the literature on leadership, players with authority often act more cooperatively than those without such power. Nevertheless, when possible, they are quickly ostracized from the group. Thus, this kind of power is not tolerated by the powerless. In stark contrast, centrality leads to less cooperative behavior and this free riding is not punished; conditional on cooperativeness, players with power from centrality are less likely to be ostracized than those without. Hence, not only is this type of power tolerated, but so is the free riding it leads to.
|Keywords:||power, cooperation, networks, public goods|
|JEL:||C91 D02 D03 H41|
|By:||Manuel Foerster (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Paris I – Panthéon-Sorbonne, CORE – Center of Operation Research and Econometrics [Louvain] – Université Catholique de Louvain (UCL) – Belgique)
Michel Grabisch (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Paris I – Panthéon-Sorbonne, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris)
Agnieszka Rusinowska (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Paris I – Panthéon-Sorbonne, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris)
We study a stochastic model of influence where agents have “yes" or “no" inclinations on some issue, and opinions may change due to mutual influence among the agents. Each agent independently aggregates the opinions of the other agents and possibly herself. We study influence processes modeled by ordered weighted averaging operators, which are anonymous: they only depend on how many agents share an opinion. For instance, this allows to study situations where the influence process is based on majorities, which are not covered by the classical approach of weighted averaging aggregation. We find a necessary and sufficient condition for convergence to consensus and characterize outcomes where the society ends up polarized. Our results can also be used to understand more general situations, where ordered weighted averages are only used to some extent. Furthermore, we apply our results to fuzzy linguistic quantifiers, i.e., expressions like “most" or “at least a few".
|Keywords:||Influence; Anonymity; Ordered weighted averaging operator; Convergence; Consensus; Fuzzy linguistic quantifier|
|By:||Attila Ambrus (Duke University)
Emilio Calvano (CSEF, Università di Napoli Federico II)
Markus Reisinger (Otto Beisheim School of Management)
In media markets, consumers spread their attention to several outlets, increasingly so as consumption migrates online. The traditional framework for studying competition among media outlets rules out this behavior by assumption. We propose a new model that allows consumers to choose multiple outlets and use it to study the effect of strategic interaction on advertising levels, and the impact of entry and mergers. We show that novel forces come into play, which reflect the outlets’ incentives to control the composition of the customer base in addition to its size. We link consumer preferences and advertising technologies to market outcomes. The model can explain a number of empirical regularities that are difficult to reconcile with existing models.
|Keywords:||Media Competition, Two-Sided Markets, Multi-Homing, Viewer Composition, Viewer, Preference Correlation|
|JEL:||D43 L13 L82 M37|
We consider the factor payment effects of a transition from open access to restricted access in the resource sector in the long-run, i.e., when both labor and capital are mobile between sectors. We show that the transition benefits (harms) the factor that is initially used more (less) intensively in the manufacturing sector relative to the resource sector. Our analysis introduces a dual approach used to compare equilibria between property regime types.
|Keywords:||Property Rights, Natural Resources, Mobile Capital, Factor Payments, Income Distribution, Dual Approach.|
|JEL:||D02 D23 D33 K11 Q2 N5 O13|
|By:||Junjie Zhou (School of International Business Administration, Shanghai University of Finance and Economics, 777 Guoding Road, Shanghai, 200433, China)
Ying-Ju Chen (School of Business and Management & School of Engineering, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)
In this paper, we examine how a seller sells a product/service with a positive consumption externality, and customers are uncertain about the product’s/service’s value. Because early adopters learn this value, we consider the customers’ intrinsic signaling incentives and positive feedback effects. Anticipating this, the seller commits to provide price discounts to the followers, and charges the leader a high price. Thus, the profit-maximizing pricing features the cream skimming strategy. We also show that the lack of seller’s commitment is detrimental to the social welfare; nonetheless, the sequential selling still boosts up the seller’s profit. Embedding a physical network with arbitrary payoff externality among customers, we investigate the optimal targeting strategy in the presence of information asymmetry. We provide precise indices for this leader selection problem. For undirected graphs, we should simply choose the player with the highest degree, irrespective of the seller’s commitment power. Going beyond this family of networks, in general the seller’s commitment power affects the optimal targeting strategy.
|Keywords:||revenue management; signaling; information transmission; social networks;|
|JEL:||D82 L14 L15|
|By:||Doh-Shin Jeon (Toulouse School of Economics and CEPR)
Yassine Lefouili (Toulouse School of Economics)
|This paper investigates the patent licensing networks formed by competing firms. Assuming that licensing agreements can involve the payment of fixed fees only and that firms compete à la Cournot, we show that the complete network is always bilaterally efficient and that the monopoly network is bilaterally efficient if the patents are complementary enough. In the case of independent patents, we fully characterize the bilaterally efficient networks and find that when the cost reduction resulting from getting access to a competitor’s technology is large enough, the complete network is the only bilaterally efficient one. We also show that the bilaterally efficient networks can be sustained as subgame-perfect Nash equilibria with symmetric payoffs. This implies that the Pareto-dominance criterion selects the network that maximizes industry profits when more than one bilaterally efficient network exists.|
|Keywords:||Licensing; Networks; Antitrust and Intellectual Property|
|JEL:||L12 L13 L41|
==noted by yinung==
生產落後期的例子: 挖礦 => 金屬生產
… An important aspect of mining is the lag between the time the decision to increase or decrease production
is made and the time the decision actually takes effect in the market. It takes several years for a planned new mine to start producing, …
Numerical Examples 1. l=落後期變長>=4, 價格波動變成發散
Numerical Examples 2. m=預期價格期數變長, 價格波動變成愈穩定
註: m =0 是典型 cobweb 理論, 即只用當期價格, 預測下一期價格
Numerical Examples 3. c= s/d =供給彈性/需求彈性, c 供需彈性比愈大, 價格波動愈不穩定
The classical cobweb theorem is extended to include production lags and price forecasts. Price forecasting based on a longer period has a stabilizing effect on prices. Longer production lags do not necessarily lead to unstable prices; very long lags lead to cycles of constant amplitude. The classical cobweb requires elasticity of demand to be greater than that of supply; this is not necessarily the case in a more general setting. Random shocks are also considered.
* Chiarella (1988)studies a system where expected prices follow adaptive expectations, when the demand curve is linear, while the supply curve is non-linear…[The] paper shows that the system is either (1) stable, (2) unstable but cyclical, or (3) chaotic.
* Chiarella and He (2004). That paper studies the cobweb model from a slightly different point of view (in particular, the supply curve is a specific S-shaped function),