Robust Equilibria in Location Games

Date: 2013-02
By: Berno Buechel (University of Hamburg)
Nils Roehl (University of Paderborn)
In the framework of spatial competition, two or more players strategically choose a location in order to attract consumers. It is assumed standardly that consumers with the same favorite location fully agree on the ranking of all possible locations. To investigate the necessity of this questionable and restrictive assumption, we model heterogeneity in consumers’ distance perceptions by individual edge lengths of a given graph. A profile of location choices is called a “robust equilibrium" if it is a Nash equilibrium in several games which differ only by the consumers’ perceptions of distances. For a finite number of players and any distribution of consumers, we provide a full characterization of all robust equilibria and derive structural conditions for their existence. Furthermore, we discuss whether the classical observations of minimal differentiation and inefficiency are robust phenomena. Thereby, we find strong support for an old conjecture that in equilibrium firms form local clusters.
Keywords: spatial competition, Hotelling-Downs, networks, graphs, Nash equilibrium, median, minimal differentiation
JEL: C72 D49 P16 D43

Facts and Figuring: An Experimental Investigation of Network Structure and Performance in Information and Solution Spaces

Date: 2014-03
By: Jesse Shore (Boston University – Department of Information Systems)
Ethan Bernstein (Harvard Business School, Organizational Behavior Unit)
David Lazer (Harvard University – Harvard Kennedy School (HKS))
Using data from a novel laboratory experiment on complex problem solving in which we varied the network structure of 16-person organizations, we investigate how an organization’s network structure shapes performance in problem-solving tasks. Problem solving, we argue, involves both search for information and search for solutions. Our results show that the effect of network structure is opposite for these two important and complementary forms of search. Dense clustering encourages members of a network to generate more diverse information, but discourages them from generating diverse theories: in the language of March (1991), clustering promotes exploration in information space, but decreases exploration in solution space. Previous research, generally focusing on only one of those two spaces at a time, has produced inconsistent conclusions about the value of network clustering. By adopting an experimental platform on which information was measured separately from solutions, we were able to reconcile past contradictions and clarify the effects of network clustering on problem-solving performance. The finding both provides a sharper tool for structuring organizations for knowledge work and reveals the challenges inherent in manipulating network structure to enhance performance, as the communication structure that helps one antecedent of successful problem solving may harm the other.
Keywords: networks, experiments, clustering, problem solving, exploration and exploitation, knowledge, information, communication, search

The Value of Connections: Evidence from the Italian-American Mafia

YNY: 這是一篇難得一見的研究主題, 以吸毒的幫派紀錄估計組織犯罪網路之網路外部性和其價值。

Date: 2014-01
By: Mastrobuoni, Giovanni (University of Essex)
Using declassified Federal Bureau of Narcotics (毒品) records on 800 US Mafia members active in the 1950s and 1960s, and on their connections within the organized crime network, I estimate network effects on gangsters’ economic status. Lacking information on criminal proceeds, I measure economic status exploiting detailed information about their place of residence. Housing values are reconstructed using current deflated transactions recorded on I deal with the potential reverse causality between the economic status and the gangster’s position in the network exploiting exogenous exposure to potential pre-immigration connections. In the absence of pre-immigration data I use the informational content of surnames, called isonomy, to measure the place of origin. The instrument is valid as long as conditional on the characteristics of the gangsters (including the region of birth and a rich set of controls about the gangsters’ legal and illegal activities) such exposure influences the gangsters’ importance in- side the network (called centrality) but not the preference for specific housing needs. A standard deviation increase in closeness centrality increases economic status by between one forth (OLS) and one standard deviation (2SLS).
Keywords: mafia, networks, centrality, housing prices, value of connections, crime, surnames, isonomy
JEL: A14 C21 D23 D85 K42 Z13

Giving and sorting among friends: Evidence from a lab-in-the-field experiment

Date: 2013
By: Binzel, Christine
Fehr, Dietmar
Among residents of an informal housing area in Cairo, we examine how dictator giving varies by the social distance between subjects – friend versus stranger – and by the anonymity of the dictator. While giving to strangers is high under anonymity, we find – consistent with Leider et al. (2009) – that (i) a decrease in social distance increases giving, (ii) giving to a stranger and to a friend is positively correlated, and (iii) more altruistic dictators increase their giving less under non-anonymity than less altruistic dictators. However, friends are not alike in their altruistic preferences, suggesting that an individual’s intrinsic preferences may not necessarily be shaped by his (or her) peers. Instead, reciprocal motives seem important, indicating that social relationships may be valued differently when individuals are financially dependent on them. —
Keywords: giving,reciprocity,social distance,networks, sorting
JEL: C93 D64 L14 O12