K. Stylianou, Leonhard F. Spiegelberg, M. Herlihy, Nic Carter
When network products and services become more valuable as their userbase grows (network effects), this tendency can become a major determinant of how they compete with each other in the market and how the market is structured. Network effects are traditionally linked to high market concentration, early-mover advantages, and entry barriers, and in the market they have also been used as a valuation tool. The recent resurgence of Bitcoin has been partly attributed to network effects, too. We study the existence of network effects in six cryptocurrencies from their inception to obtain a high-level overview of the application of network effects in the cryptocurrency market. We show that, contrary to the usual implications of network effects, they do not serve to concentrate the cryptocurrency market, nor do they accord any one cryptocurrency a definitive competitive advantage, nor are they consistent enough to be reliable valuation tools. Therefore, while network effects do occur in cryptocurrency networks, they are not (yet) a defining feature of the cryptocurrency marketas a whole.
{"title":"Cryptocurrency Market Structure and Concentration in the Presence of Network Effects","authors":"K. Stylianou, Leonhard F. Spiegelberg, M. Herlihy, Nic Carter","doi":"10.2139/ssrn.3756480","DOIUrl":"https://doi.org/10.2139/ssrn.3756480","url":null,"abstract":"When network products and services become more valuable as their userbase grows (network effects), this tendency can become a major determinant of how they compete with each other in the market and how the market is structured. Network effects are traditionally linked to high market concentration, early-mover advantages, and entry barriers, and in the market they have also been used as a valuation tool. The recent resurgence of Bitcoin has been partly attributed to network effects, too. We study the existence of network effects in six cryptocurrencies from their inception to obtain a high-level overview of the application of network effects in the cryptocurrency market. We show that, contrary to the usual implications of network effects, they do not serve to concentrate the cryptocurrency market, nor do they accord any one cryptocurrency a definitive competitive advantage, nor are they consistent enough to be reliable valuation tools. Therefore, while network effects do occur in cryptocurrency networks, they are not (yet) a defining feature of the cryptocurrency marketas a whole.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116690257","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article aims to examine the relationship between the COVID-19 pandemic and Amazon company, one of the most preferred online shopping companies. In doing this, we analyze the relationship between stock prices and sales. Since the COVID-19 virus outbreak on December 1, 2019, online shopping demand has increased exponentially. The main reasons for this are shutdowns and voluntary or mandatory quarantine decisions that occur with the disease becoming a global epidemic. With the increasing number of cases, there has been an increase in these closures and quarantines. People who prefer online shopping and have made a habit may have continued this habit when cases decrease at specific periods, measures relax, and closures reduce. The analysis results can contribute to studies on new habits that households have acquired in extreme conditions.
{"title":"The Impact of the COVID-19 Pandemic on Amazon's Business","authors":"S. Isik, Hazal İbiş, Osman Gulseven","doi":"10.2139/ssrn.3766333","DOIUrl":"https://doi.org/10.2139/ssrn.3766333","url":null,"abstract":"This article aims to examine the relationship between the COVID-19 pandemic and Amazon company, one of the most preferred online shopping companies. In doing this, we analyze the relationship between stock prices and sales. Since the COVID-19 virus outbreak on December 1, 2019, online shopping demand has increased exponentially. The main reasons for this are shutdowns and voluntary or mandatory quarantine decisions that occur with the disease becoming a global epidemic. With the increasing number of cases, there has been an increase in these closures and quarantines. People who prefer online shopping and have made a habit may have continued this habit when cases decrease at specific periods, measures relax, and closures reduce. The analysis results can contribute to studies on new habits that households have acquired in extreme conditions.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"65 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133528733","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
M. F. Morell, Ricard Espelt, Enric Senabre Hidalgo
In recent years, the platform economy has been recognised by researchers and governments around the world for its potential to contribute to the sustainable development of society. Yet, platform economy cases such as Uber, Airbnb, and Deliveroo have created a huge controversy over their socioeconomic impact, while other alternative models have been associated with a new form of cooperativism. In parallel, the United Nations are advocating global sustainable development by promoting Sustainable Development Goals (SDGs), considering elements such as decent work, inclusive and sustainable economic growth, and fostering innovation. In any case, the SDGs have been also criticised for the lack of digital perspective. This dataset draws from two 2020 European projects’ (DECODE and PLUS) data collections and presents the possibility to compare different platform economy models and their connections with the SDGs.
{"title":"Data for Sustainable Platform Economy: Connections between Platform Models and Sustainable Development Goals","authors":"M. F. Morell, Ricard Espelt, Enric Senabre Hidalgo","doi":"10.3390/data6020007","DOIUrl":"https://doi.org/10.3390/data6020007","url":null,"abstract":"In recent years, the platform economy has been recognised by researchers and governments around the world for its potential to contribute to the sustainable development of society. Yet, platform economy cases such as Uber, Airbnb, and Deliveroo have created a huge controversy over their socioeconomic impact, while other alternative models have been associated with a new form of cooperativism. In parallel, the United Nations are advocating global sustainable development by promoting Sustainable Development Goals (SDGs), considering elements such as decent work, inclusive and sustainable economic growth, and fostering innovation. In any case, the SDGs have been also criticised for the lack of digital perspective. This dataset draws from two 2020 European projects’ (DECODE and PLUS) data collections and presents the possibility to compare different platform economy models and their connections with the SDGs.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124618641","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In a market where consumers choose between payment options and firms compete with products and prices, we show that payment data drives the formation of a market monopoly. A data-sharing policy can successfully restore and maintain a competitive market, but often at the expense of both efficiency and consumer welfare. The introduction of a low-cost anonymous means of electronic payment, or digital cash, preserves the market structure and improves consumers’ welfare by enabling them to monetize their private information. We discuss the potential role of central banks in providing digital cash.
{"title":"Monetizing Privacy","authors":"M. Lee, Rodney J. Garratt","doi":"10.2139/ssrn.3767028","DOIUrl":"https://doi.org/10.2139/ssrn.3767028","url":null,"abstract":"In a market where consumers choose between payment options and firms compete with products and prices, we show that payment data drives the formation of a market monopoly. A data-sharing policy can successfully restore and maintain a competitive market, but often at the expense of both efficiency and consumer welfare. The introduction of a low-cost anonymous means of electronic payment, or digital cash, preserves the market structure and improves consumers’ welfare by enabling them to monetize their private information. We discuss the potential role of central banks in providing digital cash.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"259 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132306769","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper is devoted to testing for the explosive bubble under time-varying non-stationary volatility. Because the limiting distribution of the seminal Phillips et al. (2011) test depends on the variance function and usually requires a bootstrap implementation under heteroskedasticity, we construct the test based on a deformation of the time domain. The proposed test is asymptotically pivotal under the null hypothesis and its limiting distribution coincides with that of the standard test under homoskedasticity, so that the test does not require computationally extensive methods for inference. Appealing finite sample properties are demonstrated through Monte-Carlo simulations. An empirical application demonstrates that the upsurge behavior of cryptocurrency time series in the middle of the sample is partially explained by the volatility change.
{"title":"Time-Transformed Test for the Explosive Bubbles under Non-stationary Volatility","authors":"Eiji Kurozumi, A. Skrobotov, A. Tsarev","doi":"10.2139/ssrn.3755872","DOIUrl":"https://doi.org/10.2139/ssrn.3755872","url":null,"abstract":"This paper is devoted to testing for the explosive bubble under time-varying non-stationary volatility. Because the limiting distribution of the seminal Phillips et al. (2011) test depends on the variance function and usually requires a bootstrap implementation under heteroskedasticity, we construct the test based on a deformation of the time domain. The proposed test is asymptotically pivotal under the null hypothesis and its limiting distribution coincides with that of the standard test under homoskedasticity, so that the test does not require computationally extensive methods for inference. Appealing finite sample properties are demonstrated through Monte-Carlo simulations. An empirical application demonstrates that the upsurge behavior of cryptocurrency time series in the middle of the sample is partially explained by the volatility change.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126870612","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the economic implications of scaling blockchains under two different consensus protocols: Proof-of-Work (PoW) and Proof-of-Stake (PoS). We study an economic model whereby agents can store wealth through the blockchain's cryptocurrency but may face a costly delay when liquidating due to the blockchain's finite transaction rate. Agents may expedite processing by paying fees to the blockchain's validators. Within such a model, we study the ability of a malicious agent to compromise the security of the blockchain. We show how improved scaling alleviates congestion, leading to a decrease in equilibrium fees. Under a PoW protocol, this leads validators to earn less revenue and thus spend less on computational power, lowering the cost of a successful attack and therefore the security of the PoW blockchain. Scaling has the opposite effect for the PoS protocol as alleviating congestion increases the demand and therefore the market value of the blockchain's cryptocurrency. That increased market value increases the cost of acquiring enough cryptocurrency necessary for a successful attack and thereby improves PoS blockchain security.
{"title":"Economic Implications of Scaling Blockchains: Why the Consensus Protocol Matters","authors":"Kose John, Thomas J. Rivera, Fahad Saleh","doi":"10.2139/ssrn.3750467","DOIUrl":"https://doi.org/10.2139/ssrn.3750467","url":null,"abstract":"This paper examines the economic implications of scaling blockchains under two different consensus protocols: Proof-of-Work (PoW) and Proof-of-Stake (PoS). We study an economic model whereby agents can store wealth through the blockchain's cryptocurrency but may face a costly delay when liquidating due to the blockchain's finite transaction rate. Agents may expedite processing by paying fees to the blockchain's validators. Within such a model, we study the ability of a malicious agent to compromise the security of the blockchain. We show how improved scaling alleviates congestion, leading to a decrease in equilibrium fees. Under a PoW protocol, this leads validators to earn less revenue and thus spend less on computational power, lowering the cost of a successful attack and therefore the security of the PoW blockchain. Scaling has the opposite effect for the PoS protocol as alleviating congestion increases the demand and therefore the market value of the blockchain's cryptocurrency. That increased market value increases the cost of acquiring enough cryptocurrency necessary for a successful attack and thereby improves PoS blockchain security.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121115800","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article studies the links between financial stability and the architecture of financial systems. We review the existing literature and provide organizing frameworks for analyzing three empirically important aspects of financial architecture: the rise of nonbank financial intermediaries, the regulatory response to these structural changes, and the emergence of complex interbank networks. One of our main new results is a necessary and sufficient condition for whether nonbank intermediaries are immune to runs in an extended version of the Diamond–Dybvig model. Expected final online publication date for the Annual Review of Financial Economics, Volume 13 is November 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
{"title":"Financial Architecture and Financial Stability","authors":"Franklin Allen, A. Walther","doi":"10.2139/ssrn.3836746","DOIUrl":"https://doi.org/10.2139/ssrn.3836746","url":null,"abstract":"This article studies the links between financial stability and the architecture of financial systems. We review the existing literature and provide organizing frameworks for analyzing three empirically important aspects of financial architecture: the rise of nonbank financial intermediaries, the regulatory response to these structural changes, and the emergence of complex interbank networks. One of our main new results is a necessary and sufficient condition for whether nonbank intermediaries are immune to runs in an extended version of the Diamond–Dybvig model. Expected final online publication date for the Annual Review of Financial Economics, Volume 13 is November 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"128 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129605677","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study uses Nielsen scanner data to illustrate the benefits of transaction-level data. Specifically, we explore whether granular consumer purchases contain incremental value-relevant information about the corresponding manufacturers. Using weekly consumer purchases data generated by point-of-sale systems from 2006 to 2018, which capture around $2 trillion of U.S. retail sales, we construct a measure of aggregated consumer purchases at the firm-quarter level, and find that it strongly predicts manufacturer revenues. In addition, analyst forecasts of revenues have predictable errors and revisions, which implies that analysts do not fully incorporate the information in consumer purchases in a timely manner. Exploring investment implications, we find that hedge portfolios that buy (sell) stocks of firms with high (low) abnormal consumer purchases generate annualized returns on the magnitude of 14% to 19% depending on specification. This return predictability holds after controlling for risk factors and firm characteristics, and is robust across time. Finally, about 39% of the quarterly hedge returns are concentrated over the three-day window around earnings announcements, which suggests that the returns result from the correction of biased expectations rather than risk. These findings suggest that consumer purchases convey useful insights into firm fundamentals, and investors are slow to grasp this information, shedding light on the benefits of using transactional data for market participants.
{"title":"The Benefits of Transaction-Level Data: The Case of Nielsen Scanner Data","authors":"Ilia D. Dichev, J. Qian","doi":"10.2139/ssrn.3740052","DOIUrl":"https://doi.org/10.2139/ssrn.3740052","url":null,"abstract":"This study uses Nielsen scanner data to illustrate the benefits of transaction-level data. Specifically, we explore whether granular consumer purchases contain incremental value-relevant information about the corresponding manufacturers. Using weekly consumer purchases data generated by point-of-sale systems from 2006 to 2018, which capture around $2 trillion of U.S. retail sales, we construct a measure of aggregated consumer purchases at the firm-quarter level, and find that it strongly predicts manufacturer revenues. In addition, analyst forecasts of revenues have predictable errors and revisions, which implies that analysts do not fully incorporate the information in consumer purchases in a timely manner. Exploring investment implications, we find that hedge portfolios that buy (sell) stocks of firms with high (low) abnormal consumer purchases generate annualized returns on the magnitude of 14% to 19% depending on specification. This return predictability holds after controlling for risk factors and firm characteristics, and is robust across time. Finally, about 39% of the quarterly hedge returns are concentrated over the three-day window around earnings announcements, which suggests that the returns result from the correction of biased expectations rather than risk. These findings suggest that consumer purchases convey useful insights into firm fundamentals, and investors are slow to grasp this information, shedding light on the benefits of using transactional data for market participants.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"245 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121890591","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
What determines the composition of international portfolio investments remains an open question in international finance. In this paper, I propose a theory of international portfolio choice where trade networks play a key role. I solve in closed form for the optimal equity and bond portfolio investments in a multi-country model with arbitrary global input - output linkages and taste differences. I show that a measure of international demand exposure, called the “International Domar Weights” (IDWs), is key in determining international equity portfolios. The IDWs extend the closed-economy “Domar weights” to the international setting and capture countries' interdependence through both direct and indirect trade linkages.
Using data from the World Input - Output Database (WIOD) and Coordinated Portfolio Investment Survey (CPIS), I apply the framework to a network of 43 major developed and emerging economies and obtain four main results. First, the theoretical network portfolio is a significant predictor and explains almost half of the variation in international bilateral portfolio investments. The significance of the network portfolio is robust to controlling for gravity factors (market capitalization, distance, EU membership, etc.). Second, including the network-based portfolio in a gravity model for assets resolves the puzzle of why distance matters for asset trade at all. Third, indirect trade linkages matter for portfolio determination, highlighting the need to explicitly account for trade in intermediate inputs. Finally, the model predicts both the levels and the changes in equity home bias that have occurred since 2000.
{"title":"International Portfolio Investments with Trade Networks","authors":"Vũ T. Châu","doi":"10.2139/ssrn.3740993","DOIUrl":"https://doi.org/10.2139/ssrn.3740993","url":null,"abstract":"What determines the composition of international portfolio investments remains an open question in international finance. In this paper, I propose a theory of international portfolio choice where trade networks play a key role. I solve in closed form for the optimal equity and bond portfolio investments in a multi-country model with arbitrary global input - output linkages and taste differences. I show that a measure of international demand exposure, called the “International Domar Weights” (IDWs), is key in determining international equity portfolios. The IDWs extend the closed-economy “Domar weights” to the international setting and capture countries' interdependence through both direct and indirect trade linkages. <br><br>Using data from the World Input - Output Database (WIOD) and Coordinated Portfolio Investment Survey (CPIS), I apply the framework to a network of 43 major developed and emerging economies and obtain four main results. First, the theoretical network portfolio is a significant predictor and explains almost half of the variation in international bilateral portfolio investments. The significance of the network portfolio is robust to controlling for gravity factors (market capitalization, distance, EU membership, etc.). Second, including the network-based portfolio in a gravity model for assets resolves the puzzle of why distance matters for asset trade at all. Third, indirect trade linkages matter for portfolio determination, highlighting the need to explicitly account for trade in intermediate inputs. Finally, the model predicts both the levels and the changes in equity home bias that have occurred since 2000.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129820200","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This research report describes the use of social media platforms by Swiss SMEs (small and medium-sized enterprises). For this purpose, numbers on own profiles (social media adoption) and numbers of followers (generated reach) were systematically collected and evaluated for a representative sample of SMEs in Switzerland (N=976).
{"title":"Swiss SMEs on Social Media Platforms: Own Profiles and Generated Reach","authors":"Michael Beier, Sebastian Früh","doi":"10.2139/ssrn.3738710","DOIUrl":"https://doi.org/10.2139/ssrn.3738710","url":null,"abstract":"This research report describes the use of social media platforms by Swiss SMEs (small and medium-sized enterprises). For this purpose, numbers on own profiles (social media adoption) and numbers of followers (generated reach) were systematically collected and evaluated for a representative sample of SMEs in Switzerland (N=976).","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125619442","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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