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Author: Benjamin Golub
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Category :
Languages : en
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This dissertation theoretically analyzes how networks of relationships among decision-makers affect two kinds of economic processes: (i) investment in public goods; and (ii) repeated updating of beliefs or behaviors based on observing neighbors. The results connect these processes to the spectral properties of networks -- that is, eigenvalues and eigenvectors -- and use the connection to shed light on economic outcomes. The first essay, based on joint work with Matthew Elliott, focuses on games in which each player simultaneously exerts costly effort that provides different benefits to each other player. The goal is to find and describe effort profiles that are immune to coordinated coalitional deviations when such a game is played repeatedly. Formally, these effort profiles are the ones that can be sustained in a strong Nash equilibrium of the repeated game. We introduce a class of effort profiles that are called centrality-stable. These are characterized by a network centrality condition: agent A's contribution (defined as effort level times marginal cost) is equal to a weighted sum of the contributions of those who help A; the weight on B's contribution measures the marginal benefit B's effort provides to A. Under certain assumptions (mainly concavity of utility functions), centrality-stable profiles exist, are Pareto-efficient, and any such profile is sustainable in a coalitionally robust equilibrium of the repeated game. Centrality-stable profiles also have an alternative definition: they are those at which all agents are first-order indifferent to scaling all efforts by a factor near $1$. This single condition rules out all profitable coalitional deviations. The results are obtained without parametric assumptions, using the theory of general equilibrium and its relation to the core, along with the Perron-Frobenius spectral theory of nonnegative matrices. When agents are uncertain about each other's utility functions but can verify marginal costs and benefits at an implemented effort profile, then the centrality-stable profiles are the only ones that are immune to manipulation through misreporting of preferences. The second essay, based on joint work with Matthew O. Jackson, studies learning in a setting where agents receive independent noisy signals about the true value of a variable and then communicate in a network. They naively update beliefs by repeatedly taking weighted averages of neighbors' opinions. We show that all opinions in a large society converge to the truth if and only if the influence of the most influential agent on the long-run beliefs vanishes as the society grows. We also identify obstructions to this, including the existence of prominent groups, and provide structural conditions on the network ensuring efficient learning. The third essay, also based on joint work with Matthew O. Jackson, examines how the speed of such an updating process depends on homophily: the tendency of agents to associate disproportionately with those having similar traits. When agents' beliefs or behaviors are developed by averaging what they see among their neighbors -- as in the learning model discussed above or in a myopic best-reply dynamic -- convergence to a consensus is slowed by the presence of homophily, but is not influenced by network density. This is in stark contrast to the viral spread of a belief or behavior along shortest paths -- a process whose speed is increasing in network density but does not depend on homophily. In deriving these results, we propose a new, general spectral measure of homophily based on the relative frequencies of interactions among different groups.
Author: Benjamin Golub
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This dissertation theoretically analyzes how networks of relationships among decision-makers affect two kinds of economic processes: (i) investment in public goods; and (ii) repeated updating of beliefs or behaviors based on observing neighbors. The results connect these processes to the spectral properties of networks -- that is, eigenvalues and eigenvectors -- and use the connection to shed light on economic outcomes. The first essay, based on joint work with Matthew Elliott, focuses on games in which each player simultaneously exerts costly effort that provides different benefits to each other player. The goal is to find and describe effort profiles that are immune to coordinated coalitional deviations when such a game is played repeatedly. Formally, these effort profiles are the ones that can be sustained in a strong Nash equilibrium of the repeated game. We introduce a class of effort profiles that are called centrality-stable. These are characterized by a network centrality condition: agent A's contribution (defined as effort level times marginal cost) is equal to a weighted sum of the contributions of those who help A; the weight on B's contribution measures the marginal benefit B's effort provides to A. Under certain assumptions (mainly concavity of utility functions), centrality-stable profiles exist, are Pareto-efficient, and any such profile is sustainable in a coalitionally robust equilibrium of the repeated game. Centrality-stable profiles also have an alternative definition: they are those at which all agents are first-order indifferent to scaling all efforts by a factor near $1$. This single condition rules out all profitable coalitional deviations. The results are obtained without parametric assumptions, using the theory of general equilibrium and its relation to the core, along with the Perron-Frobenius spectral theory of nonnegative matrices. When agents are uncertain about each other's utility functions but can verify marginal costs and benefits at an implemented effort profile, then the centrality-stable profiles are the only ones that are immune to manipulation through misreporting of preferences. The second essay, based on joint work with Matthew O. Jackson, studies learning in a setting where agents receive independent noisy signals about the true value of a variable and then communicate in a network. They naively update beliefs by repeatedly taking weighted averages of neighbors' opinions. We show that all opinions in a large society converge to the truth if and only if the influence of the most influential agent on the long-run beliefs vanishes as the society grows. We also identify obstructions to this, including the existence of prominent groups, and provide structural conditions on the network ensuring efficient learning. The third essay, also based on joint work with Matthew O. Jackson, examines how the speed of such an updating process depends on homophily: the tendency of agents to associate disproportionately with those having similar traits. When agents' beliefs or behaviors are developed by averaging what they see among their neighbors -- as in the learning model discussed above or in a myopic best-reply dynamic -- convergence to a consensus is slowed by the presence of homophily, but is not influenced by network density. This is in stark contrast to the viral spread of a belief or behavior along shortest paths -- a process whose speed is increasing in network density but does not depend on homophily. In deriving these results, we propose a new, general spectral measure of homophily based on the relative frequencies of interactions among different groups.
Author: Malte Cherdron
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Category :
Languages : en
Pages : 0
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Author: Hemant Patil
Publisher:
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Category :
Languages : en
Pages : 108
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In the first Essay, we present a model in which buyers and sellers use links to trade with each other. Each seller produces a good which can be one of two types. Buyers are ex ante identical but receive specification or valuation shocks after the links are formed. We show that efficient networks are stable and that severing a link in an efficient network results in a higher price for the buyer but a lower price for the seller. We also examine network intermediation when sellers (buyers) form links sequentially. When sellers form links sequentially, the first seller becomes an intermediary and shares links with other sellers; this makes all sellers better off. However, when buyers form links sequentially, buyers may or may not share links. If links are shared multiple intermediaries result. Second essay studies the social networks of economic publishing. We focus on connections between the editors of the journal and the authors of the paper. The links between authors and editors are defined based on their institutional ties. We provide a model in which non-linked authors do not have access to the exact quality standards at the journal as opposed to the linked authors who have such information. We show how such asymmetry coupled with measurement errors associated with quality leads to fewer low quality papers published by the linked authors. We support this finding empirically using data from ten top economic journals. We also show that if links are classified using the identity of nodes such as authors being students or faculty members in an institution then there are significant variations among journals with regard to the information dissemination through different types of links. In the third essay, we present a model in which agents use links to trade with each other. We divide the agents into two categories stayers and travellers. Stayers cannot travel whereas travellers can travel to the stayers to exchange. There are three types of goods. Stayers are subject to endowment shock which determines the type of one indivisible unit of the good is determined. Travellers are subject to preference shock wherein the type of good they prefer for consumption is determined. Travellers cannot travel to the stayer unless they have a prior link. In such environment, we determine the optimum travel patterns in a complete network and show that the set of possible Nash equilibria support both Walrasian exchange and commodity money for shocks which do not support double coincidence of wants. We also show the efficient link patterns which support optimum travel strategies and determine the stability of such link patterns.
Author: Liza Charroin
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Category :
Languages : en
Pages : 0
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In a world where networks become a dominant form of organization, the structure of networks and the position of individuals in these networks affect individual behavior and aggregate economic outcomes. The analysis of network formation by a central planner or by individuals themselves is at the heart of this thesis on the economics of networks.Chapter 1 theoretically studies the optimal formation and protection of networks by a central planner knowing that an external agent can destroy k links. The protection of the network can be guaranteed either by densifying the links between nodes, or by protecting the links. When the cost of protection is relatively small, a minimally connected network composed of protected links guarantees the communication flow; if this cost is high, the optimal solution is to form a symmetric network where each node has at least k+1 non-protected links.Chapter 2 explores the decentralized formation of networks in the laboratory by analyzing individual linking formation decisions when one agent has a higher value than others and that the linking formation process is sequential. The results show that sequentiality facilitatesthe coordination on efficient networks but that do not correspond to the Subgame PerfectEquilibrium. The heterogeneity across agents increases the asymmetry of networks because of the polarization of links on the agent with a higher value.Chapter 3 studies the impact of the endogenous formation of networks on the importance of peer effects, applied to dishonest behavior. In order to identify the effects of social comparisons, two controlled environments are designed in the laboratory in which individuals choose or not their peers, and then observe their behavior. The results show that peer effects on dishonest behavior are significantly higher when individuals can choose their peers.
Author: Lucas Vernet
Publisher:
ISBN:
Category :
Languages : en
Pages : 117
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This dissertation lies at the intersection of two fields of research in economics that have recently substantially developed: on the one hand, the modeling and study of economic networks, and on the other hand, transport theory and its applications in economics. The four chapters of this dissertation present theoretical results in relation with these two topics and put stress on their connections. The first chapter models bipartite contracts on a decentralized market as an equilibrium flow problem. We prove the existence of a competitive equilibrium outcome and discuss its effciency. We interpret this equilibrium in the case of indivisible commodities. As an illustration, we build a model for the overnight interbank loan market with counterparty risk and collateralization costs. In the second one, written in collaboration with Alfred Galichon and Larry Samuelson, we prove a monotone comparative statics theorem that we then apply to several classical economic models (matching models, min-cost flow problems and hedonic models). The third chapter is a joint work with Alfred Galichon and Arthur Charpentier. It presents tools to solve for matching problems on large geographic networks before applying them to examples. Finally, the fourth chapter, written with Rakesh Vohra, shows how a monopolistic insurer can use externalities between agents - modeled as a network - to maximize his profit. We show that a monopolistic insurer decreases the welfare of all agents.
Author: Timo Hiller
Publisher:
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Category : Business networks
Languages : en
Pages : 67
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This thesis consists of three papers in the field of social and economic networks. In the first, called Peer Effects in Endogenous Networks, I build a model of endogenous net- work formation in the presence of peer effects, which play an important role for decisions concerning educational attainment, criminal activity, labor market participation and R&D expenditures of firms. The class of payoff functions assumed induce local complementar- ities in effort levels and positive local externalities. Links are one-sided and agents move simultaneously in links and effort levels. I find that equilibrium networks display - other than the complete and the empty network - a core-periphery structure, which is commonly observed in empirical studies. Ex-ante homogenous agents may obtain very different ex-post outcomes, depending on the network that arises in equilibrium. Multiplicity of equilibria serves as an explanation for large differences in behaviour across otherwise identical groups. The second paper, titled Alliance Formation and Coercion in Networks, presents a game-theoretic model of network formation, which allows agents to enter bilateral alliances and to extract payoffs from enemies. Each pair of agents creates a surplus of one, which allies divide in equal parts. If agents are enemies, then the agent with more allies obtains a larger share of the surplus. I show that Nash equilibria are of two types. First, a state of utopia, where all agents are allies. Second, asymmetric equilibria, such that agents can be partitioned into sets of different size, where agents within the same set are allies and agents in different sets are enemies. These results stand in contrast to coalition formation games in the economics of conflict literature, where stable group structures are generally symmetric. The model also provides a game-theoretic foundation for structural balance, a long-standing notion in social psychology, which has been fruitfully applied to the study of alliance formation in international relations. The third paper, A Note on Stochastically Stable States for Alliance Formation and Coercion in Networks, introduces dynamics into the model of the second paper and provides a conjecture for stochastically stable states. At every time period t and with fixed probability p, each agent adjusts his strategy myopically, while with small probability E chooses his strategy at random. The configuration where all agents sustain only positive links is shown to not be stochastically stable. Stochastically stable state are thought to be such that the number of cliques is maximal, under a restriction on the relative size of groups.
Author: Sebastian Cortes-Corrales
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Category :
Languages : en
Pages :
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Author: Cristian Emerson Melo Sanchez
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 228
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This thesis belongs to the growing field of economic networks. In particular, we develop three essays in which we study the problem of bargaining, discrete choice representation, and pricing in the context of networked markets. Despite analyzing very different problems, the three essays share the common feature of making use of a network representation to describe the market of interest. In Chapter 1 we present an analysis of bargaining in networked markets. We make two contributions. First, we characterize market equilibria in a bargaining model, and find that players' equilibrium payoffs coincide with their degree of centrality in the network, as measured by Bonacich's centrality measure. This characterization allows us to map, in a simple way, network structures into market equilibrium outcomes, so that payoffs dispersion in networked markets is driven by players' network positions. Second, we show that the market equilibrium for our model converges to the so called eigenvector centrality measure. We show that the economic condition for reaching convergence is that the players' discount factor goes to one. In particular, we show how the discount factor, the matching technology, and the network structure interact in a very particular way in order to see the eigenvector centrality as the limiting case of our market equilibrium. We point out that the eigenvector approach is a way of finding the most central or relevant players in terms of the "global" structure of the network, and to pay less attention to patterns that are more "local". Mathematically, the eigenvector centrality captures the relevance of players in the bargaining process, using the eigenvector associated to the largest eigenvalue of the adjacency matrix of a given network. Thus our result may be viewed as an economic justification of the eigenvector approach in the context of bargaining in networked markets. As an application, we analyze the special case of seller-buyer networks, showing how our framework may be useful for analyzing price dispersion as a function of sellers and buyers' network positions. Finally, in Chapter 3 we study the problem of price competition and free entry in networked markets subject to congestion effects. In many environments, such as communication networks in which network flows are allocated, or transportation networks in which traffic is directed through the underlying road architecture, congestion plays an important role. In particular, we consider a network with multiple origins and a common destination node, where each link is owned by a firm that sets prices in order to maximize profits, whereas users want to minimize the total cost they face, which is given by the congestion cost plus the prices set by firms. In this environment, we introduce the notion of Markovian traffic equilibrium to establish the existence and uniqueness of a pure strategy price equilibrium, without assuming that the demand functions are concave nor imposing particular functional forms for the latency functions. We derive explicit conditions to guarantee existence and uniqueness of equilibria. Given this existence and uniqueness result, we apply our framework to study entry decisions and welfare, and establish that in congested markets with free entry, the number of firms exceeds the social optimum.
Author: Roghaiyeh Dastranj Tabrizi
Publisher:
ISBN:
Category :
Languages : en
Pages : 121
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Peer pressure and social networks are powerful influences on behaviour. The focus of this thesis is studying the channels through which social networks impact individuals' choices and outcomes in three different contexts.The first paper of this thesis (Chapter 2) develops a theoretical network-based model of Twitter, formulating individual interaction as a dynamic game in which heterogenous agents choose a 'niche' to tweet in, and whom to follow. By characterizing the stable networks that the dynamic Markov process converges to, we show that information does not diffuse as widely as one might expect: although many agents are directly or indirectly connected to each other, agents strategically filter information in accordance with their niche.The second paper of this thesis (Chapter 3) presents a social network model of criminal activity, where agents' payoffs depend on the structure of their connections with each other. The Nash equilibria in crime activity are characterized, and the theoretical results are used to identify the optimal network, which maximize the sum of agents' payoffs, by searching over all possible non-isomorphic graphs of given size. In addition, the effects of different anti-crime policies on the optimal crime network structure and the overall crime level are analyzed and presented.The third paper of this thesis (Chapter 4) studies the direct and spillover effects of social interactions on fundraising and engagement activities in a network of volunteers from Engineers Without Borders, Canada. The network effects are modelled through two separate channels: a strategic interaction term which affects the marginal benefit from supplying effort and a direct spillover term affecting the level of payoff. This model is estimated using several online and offline networks via instrumental variables and system GMM. The results always present large significant levels of strategic complementarities in fundraising activities. However, in engagement activities, strategic complementarities are only significant in online networks. Additionally, engagement activities exhibit positive significant levels of direct spillovers for all networks. In contrast, in fundraising campaigns, the direct spillover effect is only significant in large offline networks.
Author: James E. Rauch
Publisher: Russell Sage Foundation
ISBN: 1610444663
Category : Social Science
Languages : en
Pages : 257
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Half of all workers are hired through personal referrals, and networks of social connections channel the flows of capital, technology, and international trade. Sociologists and economists alike recognize that economic exchange is shaped by social networks, which propagate information and facilitate trust, but each discipline brings a distinct theoretical perspective to the study of networks. Sociologists have focused on how networks shape individual behavior, economists on how individual choices shape networks. The Missing Links is a bold effort by an interdisciplinary group of scholars to synthesize sociological and economic theories of how economic networks emerge and evolve. Interweaving sophisticated theoretical models and concrete case studies, The Missing Links is both an introduction to the study of economic networks and a catalyst for further research. Economists Rachel Kranton and Deborah Minehart illustrate their field's approach to modeling network formation, showing how manufacturers form networks of suppliers in ways that maximize profits. Exemplifying the sociological approach, Ronald Burt analyzes patterns of cooperation and peer evaluations among colleagues at a financial organization. He finds that dense connections of shared acquaintances lead to more stable reputations. In the latter half of the book, contributors combine the insights of sociology and economics to explore a series of case studies. Ray Reagans, Ezra Zuckerman, and Bill McEvily investigate an R & D firm in which employees participate in overlapping collaborative teams, allowing the authors to disentangle the effects of network structure and individual human capital on team performance. Kaivan Munshi and Mark Rosenzweig examine how economic development and rising inequality in India are reshaping caste-based networks of mutual insurance and job referrals. Their study shows that people's economic decisions today are shaped both by the legacy of the caste hierarchies and by the particular incentives and constraints that each individual faces in an evolving labor market. Economic globalization is forging new connections between people in distant corners of the world, while unsettling long-standing social relations. Anyone interested in understanding the opportunities and challenges of this era of rapid change will find a highly informative guide in The Missing Links.
