Social and Economic Networks
Contact the Editor of this blog, Lorenzo Ductor
"Pricing in Social Networks"
(Francis Bloch and Nicolas Quérou)
Abstract: We analyze the problem of optimal monopoly pricing in social networks where agents care about consumption or prices of their neighbors. We characterize the relation between optimal prices and consumers' centrality in the social network. This relation depends on the market structure (monopoly vs. oligopoly) and on the type of externalities (consumption versus price). We identify two situations where the monopolist does not discriminate across nodes in the network (linear monopoly with consumption externalities and local monopolies with price externalities). We also analyze the robustness of the analysis with respect to changes in demand, and the introduction of bargaining between the monopolist and the consumer.
(Yann Bramoullé and Sanjeev Goyal)
Abstract: Favoritism refers to the act offering jobs, contracts and resources to members of one's own social group in preference to others who are outside the group. Favoritism is prevalent in both rich and poor countries. At the same time, favoritism is widely associated with economic inefficiency, political unrest and slow economic growth. This paper examines the economic origins and the consequences of favoritism. We argue that favoritism is a mechanism for surplus diversion away from the society at large and toward the group. As it usually entails inefficiencies, favoritism highlights the role of frictions in economicexchange. Favoritism is easier to sustain in a small homogenous group and when there is heterogeneity across groups. Favoritism has negative effects on innovation. These predictions appear to be consistent with empirical evidence.
"Strategic Interaction and Networks"
(Yann Bramoullé, Rachel Kranton and Martin D'Amours)
Abstract: Geography and social links shape interactions between people and nrms. In schools, industries, and markets, the entire network of links ultimately determines incentives and outcomes. This paper analyzes a large class of games on networks and obtains a striking result. Equilibria depend on a single number: the lowest eigenvalue of a network matrix. This paper is the first to uncover the importance of the lowest eigenvalue to economic and social outcomes. It captures the greatest possible amplification of strategic play. The paper combines new tools - potential games, optimization, and spectral graph theory- to solve for all Nash and stable equilibria for any network and applie the results to information creation, crime, and the econometrics of peer effects.
"Social Networks and Research Output"
(Lorenzo Ductor, Marcel Fafchamps, Sanjeev Goyal and Marco van der Leij)
Abstract: We study how knowledge about the social network of an individual researcher -- as embodied in his coauthor relations -- helps us in developing a more accurate prediction of his future productivity. Our first finding is that incorporating information about coauthor networks leads to a modest improvement in the accuracy of forecasts on individual output, over and above what we can predict based on the knowledge of past individual output. Our second finding is that the signalling content of the network is quantitatively more important than the flow of ideas.
"Does Co-authorship Lead to Higher Academic Productivity?"
Abstract: In recent decades, co-authorship and policies aimed at inducing academic collaboration have increased simultaneously. Assuming that intellectual collaboration is exogenously determined, prior studies found a negative relationship between co-authorship and productivity. I examine a panel data on economists publishing from 1970 to 1999 to test the causal effect of intellectual collaboration on intellectual output. As characteristics of the individual and her opportunity sets are endogenously related to both collaboration and productivity, I instrument the amount of co-authorship by the common research interest between an author and her potential coauthors. After controlling for endogenous co-authorship formation, unobservable heterogeneity and time varying factors, the effect of intellectual collaboration on individual performance becomes positive. However, this effect varies significantly between high and low productive authors. These findings justify the existence of policies that stimulate intellectual collaboration.
(Roberta Dessí, Edoardo Gallo and Sanjeev Goyal)
Abstract: We study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit three main cognitive biases: (i) they underestimate the mean degree compared to the actual network; (ii) they overestimate the number of rare degrees; (iii) they underestimate the number of frequent degrees. We then analyze survey data from two `real' friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases. The experiments yield three further findings: (iv) network cognition is affected by the subject's location, (v) the accuracy of network cognition varies with the nature of the network, and (vi) network cognition has a signifficant effect on economic decisions.
"Network Design and Defence"
(Marcin Dziubinski and Sanjeev Goyal)
Abstract: Infrastructure networks - in communication and transport - are a key feature of an economy. The functionality of these networks depends on the connectivity of different components. However, these networks face a variety of threats ranging from natural disasters to intelligent attacks (carried out by human agents). How should networks be defended and designed to ensure connectivity? We develop a strategic model to study this question. There are two `players', designer and an adversary. The designer forms links among a given set of n nodes. These links are costly. In addition, the designer may also choose to protect some nodes at a cost. The adversary then allocates his resources to attack nodes. Successful attack on a node leads to its elimination (along with all its connections). We study the sub-game perfect equilibrium of this game. Our main finding is that if defence is affordable and reliable then a few central nodes are protected, linking is heterogeneous and the network is sparse. On the other hand, if defence is relatively costly compared to linking then dense and homogeneous networks arise in equilibrium.
"Occupational mismatch and social networks"
Abstract: A labor market model with heterogeneous workers and jobs is used to investigate the effects of social networks as a job information channel regarding the level of mismatch between workers and firms. I compare the efficiency in producing good matches of the formal market to that of social networks. I assume that employed individuals forward the offers at their disposal to a randomly chosen contact. This behavior might be seen as favoritism: workers recommend each other for any kind of jobs irrespective of productivity. I show that as the probability that ties connect similar agents (homophily) increases, the mismatch level decreases in society. If this probability is sufficiently high, networks provide good matches at a higher rate than the formal market, for any efficiency level of the market. In this case the mismatch level is lower in society with social networks than it would be in a market economy. Hence, the presence of social networks can reduce mismatch despite favoritism. The implications of mismatch on wages depend on the definition of mismatch. Further, I define mismatch as being over- or under-educated compared to the required education of the job. Using the European Community Household Panel I show that, consistently with the model's predictions, being connected to similar individuals increases the wages attained for workers with high education level but decreases it for workers with low education.
"Risk aversion and social networks"
(Jaromír Kováríck and Marco van der Leij)
Abstract: Agents involved in the formation of a social, economic and ﬁnancial networks typically face uncertainty about the beneﬁts of creating a link. However, the interplay of such uncertainty and risk attitudes has been neglected in the network formation literature. We propose a dynamic network formation model that builds on utility maximization, incomplete information, and risk aversion. This model generates a correlation between network positions, namely the clustering coeﬃcient, and payoﬀs of individuals. We also show how the generated network architecture depends on the uncertainty in the environment it is embedded in.
"Social Networks and Labor Market Inequality between Ethnicities and Races"
(Ott Toomet, Marco van der Leij and Meredith Rolfe)
Abstract: This paper analyzes the relationship between unexplained racial/ethnic wage differentials on the one hand and social network segregation, as measured by inbreeding homophily, on the other hand. Our analysis is based on both U.S. and Estonian surveys, supplemented with Estonian telephone communication data. In case of Estonia we consider the regional variation in economic performance of the Russian minority, and in the U.S. case we consider the regional variation in black-white differentials. Our analysis finds a strong relationship between the size of the differential and network segregation: regions with more segregated social networks exhibit larger unexplained wage gaps.
New Journal in Networks coming in Spring 2013: NETWORK SCIENCE
Overview: Network Science is a new journal for a new discipline - one using the network paradigm, focusing on actors and relational linkages, to inform research, methodology, and applications from many fields across the natural, social, engineering and informational sciences. Given growing understanding of the interconnectedness and globalization of the world, network methods are an increasingly recognized way to research aspects of modern society along with the individuals, organizations, and other actors within it. The discipline is ready for a comprehensive journal, open to papers from all relevant areas. Network Science is a defining work, shaping this new discipline. The journal welcomes contributions from researchers in all areas working on network theory, methods, and data.
Lada Adamic, University of Michigan
Ulrik Brandes, University of Konstanz, Germany
Noshir Contractor, Northwestern University, USA
Sanjeev Goyal, University of Cambridge, UK
Garry Robins, University of Melbourne, Australia
Thomas Valente, University of Southern California, USA
Alessandro Vespignani, Northeastern University, USA
Stanley Wasserman, Indiana University, USA
More information here.
Network Approaches for Interbank Markets. A conference jointly organized by the University Jaume I of Castellón, the University of Kiel, and the Kiel Institute for the World Economy.
Overview: The 2007-09 global financial crisis has brought to the fore the importance of the network of claims and liabilities emanating from the close ties between financial institutions. The potential of contagious domino effect due to knock-on effects with such a network and various channels of transmission of shocks within the banking system have become a major concern for macro prudential regulation. The analysis of these connections requires new instruments of analysis that have not been used in economics before. This conference aims to take stock of the state-of-the-art, compare extant approaches and try to identify open questions for future research. We invite the submission of both theoretical and empirical papers addressing aspects related to the structure and dynamics of interbank networks, with the potential of giving policy recommendations for regulatory policy
Deadline for manuscript submissions: 28 February 2013.
More information here.
XXXIII Sunbelt Social Networks Conference of the International Network for Social Network Analysis (INSNA), 21-26 May 2013, Hamburg, Germany.
Overview: The International Sunbelt Social Network Conference is the official conference of the International Network for Social Network Analysis (INSNA). INSNA currently has over 1,000 members and more people than ever are interested in attending and presenting their work at Sunbelt conferences. Sunbelt XXXIII in Hamburg, Germany, 21-26 May 2013, will provide an interdisciplinary venue for presenting current work in the field of social networks. Workshops and conference sessions will allow scholars interested in theory, methods, or applications of social network analysis to share ideas and explore common interests. Workshops will take place during all of Tuesday, 21 May 2013, and the morning of Wednesday, 22 May 2013. Papers will be presented each day from Wednesday noon and continue through to noon on Sunday, 26 May 2013. To accommodate a large number of papers (up to 700 are expected), there will be several paper sessions running concurrently, with 20 minute slots for each paper. A two-hour poster session takes place on Friday, 24 May 2013. There will also be ample coffee and lunch breaks so participants can find time to engage in discussions of research strategies, results, and applications. The BANQUET will be held on Thursday, 23 May 2013.
Deadline for manuscript submissions: 7 January 2013.