We analyze how interdependencies between organizations in financial networks can lead to multiple possible equilibrium outcomes. A multiplicity arises if and only if there exists a certain type of dependency cycle in the network that allows for self-fulfilling chains of defaults. We provide necessary and sufficient conditions for banks' solvency in any equilibrium. Building on these conditions, we characterize the minimum bailout payments needed to ensure systemic solvency, as well as how solvency can be ensured by guaranteeing a specific set of debt payments. Bailout injections needed to eliminate self-fulfilling cycles of defaults (credit freezes) are fully recoverable, while those needed to prevent cascading defaults outside of cycles are not. We show that the minimum bailout problem is computationally hard, but provide an upper bound on optimal payments and show that the problem has intuitive solutions in specific network structures such as those with disjoint cycles or a core-periphery structure.
{"title":"Credit Freezes, Equilibrium Multiplicity, and Optimal Bailouts in Financial Networks","authors":"M. Jackson, Agathe Pernoud","doi":"10.2139/ssrn.3735251","DOIUrl":"https://doi.org/10.2139/ssrn.3735251","url":null,"abstract":"We analyze how interdependencies between organizations in financial networks can lead to multiple possible equilibrium outcomes. A multiplicity arises if and only if there exists a certain type of dependency cycle in the network that allows for self-fulfilling chains of defaults. We provide necessary and sufficient conditions for banks' solvency in any equilibrium. Building on these conditions, we characterize the minimum bailout payments needed to ensure systemic solvency, as well as how solvency can be ensured by guaranteeing a specific set of debt payments. Bailout injections needed to eliminate self-fulfilling cycles of defaults (credit freezes) are fully recoverable, while those needed to prevent cascading defaults outside of cycles are not. We show that the minimum bailout problem is computationally hard, but provide an upper bound on optimal payments and show that the problem has intuitive solutions in specific network structures such as those with disjoint cycles or a core-periphery structure.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129971893","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}
We use data from 14 European countries and provide evidence that the fall in prices of information and communication technologies (ICT) is associated with a significant increase in the share of employees who work from home. Similar results hold within age, gender, and occupation groups. There are notable differences across age groups, however. The effect of the fall in ICT prices on working from home increases with age. A rationale for such a result is that the preference for working from home increases with age.
{"title":"The Impact of ICT on Working from Home: Evidence from EU Countries","authors":"Vahagn Jerbashian, Montserrat Vilalta-Bufí","doi":"10.2139/ssrn.3736644","DOIUrl":"https://doi.org/10.2139/ssrn.3736644","url":null,"abstract":"We use data from 14 European countries and provide evidence that the fall in prices of information and communication technologies (ICT) is associated with a significant increase in the share of employees who work from home. Similar results hold within age, gender, and occupation groups. There are notable differences across age groups, however. The effect of the fall in ICT prices on working from home increases with age. A rationale for such a result is that the preference for working from home increases with age.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"48 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133228979","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}
Reputation systems are typically used in markets with asymmetric information, but they can cause the cold-start problem for young sellers who lack historical sales. Exploiting a field experiment on a large e-commerce marketplace, we show that in the presence of a reputation-based quality certification, introducing a second certification tier that is less history-dependent and less demanding mitigates the cold-start problem: it increases demand for high-quality young sellers, incentivizes their quality provision, and increases their chance of eventually obtaining the top-tier certification. Moreover, it prompts established sellers to re-optimize their effort decision. Therefore, the net impact of introducing a less history-dependent signal on quality provision depends on underlying market fundamentals.
{"title":"Mitigating the Cold-start Problem in Reputation Systems: Evidence from a Field Experiment","authors":"Xiang Hui, Zekun Liu, Weiqing Zhang","doi":"10.2139/ssrn.3731169","DOIUrl":"https://doi.org/10.2139/ssrn.3731169","url":null,"abstract":"Reputation systems are typically used in markets with asymmetric information, but they can cause the cold-start problem for young sellers who lack historical sales. Exploiting a field experiment on a large e-commerce marketplace, we show that in the presence of a reputation-based quality certification, introducing a second certification tier that is less history-dependent and less demanding mitigates the cold-start problem: it increases demand for high-quality young sellers, incentivizes their quality provision, and increases their chance of eventually obtaining the top-tier certification. Moreover, it prompts established sellers to re-optimize their effort decision. Therefore, the net impact of introducing a less history-dependent signal on quality provision depends on underlying market fundamentals.<br>","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114820742","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}
The sharing economy is a growing sector that raises important questions for governance, trust, and the impact of the intersection of commercial and social motives. However, governance research in this context is relatively limited, and generally focused on the consumer perspective.
The authors take a triadic approach to governance that explores the relationships between platforms, providers, and consumers. Leveraging governance theories from marketing and management, as well as agency and social exchange theories, the authors develop a conceptual model of formal and relational governance mechanisms in the sharing economy. Through qualitative in-depth interviews and open-ended survey questions, and a field study using text analysis the authors validate their model and demonstrate that economic-focused platforms favor formal governance mechanisms and develop institution-based trust in the platform, while social-focused platforms favor relational governance mechanisms and lead to interpersonal trust in the membership. Hybrid platforms feature both forms of governance but formal mechanisms dominate. Further, the authors describe the implications for managers to deal with exchange and governance problems to prevent platform churn (customer and provider defection).
{"title":"Governance and Trust in the Sharing Economy: Issues and Solutions along the Social-Economic Exchange Continuum","authors":"Michael Moorhouse, June Cotte, M. Ding, X. Wang","doi":"10.2139/ssrn.3730391","DOIUrl":"https://doi.org/10.2139/ssrn.3730391","url":null,"abstract":"The sharing economy is a growing sector that raises important questions for governance, trust, and the impact of the intersection of commercial and social motives. However, governance research in this context is relatively limited, and generally focused on the consumer perspective.<br><br>The authors take a triadic approach to governance that explores the relationships between platforms, providers, and consumers. Leveraging governance theories from marketing and management, as well as agency and social exchange theories, the authors develop a conceptual model of formal and relational governance mechanisms in the sharing economy. Through qualitative in-depth interviews and open-ended survey questions, and a field study using text analysis the authors validate their model and demonstrate that economic-focused platforms favor formal governance mechanisms and develop institution-based trust in the platform, while social-focused platforms favor relational governance mechanisms and lead to interpersonal trust in the membership. Hybrid platforms feature both forms of governance but formal mechanisms dominate. Further, the authors describe the implications for managers to deal with exchange and governance problems to prevent platform churn (customer and provider defection).","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"77 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115464513","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}
Social connections are valuable for workers entering the labor market, both because they might increase the likelihood of knowing about a job opening at a specific firm and because they may increase the likelihood of being hired, conditional on knowing about an opening. Using data from Israel and relying on identifying variation from the timing of job movements of parents' coworkers, I find that workers are three to four times more likely to find employment in firms where their parents have professional connections than in otherwise similar firms. I use the same variation to structurally estimate a matching model of the labor market with search frictions, and find that connections double the probability of meeting and increase by 35% the likelihood of being hired given a meeting. The estimated value of one additional meeting with a connected firm is 3.7% of the average wage, with around 2/5 of the increase coming from the direct value of a connection. Connections matter for inequality; I find that the wage gap between Arabs and Jews decreases by 12% when equalizing the groups' connections, but increases by 56% when prohibiting the hiring of connected workers. These seemingly opposing results are explained by the fact that Arabs have connections to lower-paying firms but use their connections more extensively.
{"title":"Who Works Where and Why? Parental Networks and the Labor Market","authors":"Shmuel San","doi":"10.2139/ssrn.3726993","DOIUrl":"https://doi.org/10.2139/ssrn.3726993","url":null,"abstract":"Social connections are valuable for workers entering the labor market, both because they might increase the likelihood of knowing about a job opening at a specific firm and because they may increase the likelihood of being hired, conditional on knowing about an opening. Using data from Israel and relying on identifying variation from the timing of job movements of parents' coworkers, I find that workers are three to four times more likely to find employment in firms where their parents have professional connections than in otherwise similar firms. I use the same variation to structurally estimate a matching model of the labor market with search frictions, and find that connections double the probability of meeting and increase by 35% the likelihood of being hired given a meeting. The estimated value of one additional meeting with a connected firm is 3.7% of the average wage, with around 2/5 of the increase coming from the direct value of a connection. Connections matter for inequality; I find that the wage gap between Arabs and Jews decreases by 12% when equalizing the groups' connections, but increases by 56% when prohibiting the hiring of connected workers. These seemingly opposing results are explained by the fact that Arabs have connections to lower-paying firms but use their connections more extensively.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116999155","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}
Warut Khern-am-nuai, Hossein Ghasemkhani, Dandan Qiao, Karthik N. Kannan
This study uses observational data from two online retail sites to examine the effect of questions and answers on sales of experience goods. Particularly, we leverage the naturally occurring experiment where the Q&A capabilities are available on only one platform. Interestingly, we discover that answers, especially the depth of answers, positively affect sales. Additionally, the fraction of questions with at least one answer positively and significantly affects product sales. Our additional textual content analyses unveil that fit- and quality-oriented questions have different effects on sales, as do positive and negative answers. Insights from this work can help platform managers develop Q&A ecosystems and content management policies.
{"title":"The Impact of Online Q&As on Product Sales: The Case of Amazon Answer","authors":"Warut Khern-am-nuai, Hossein Ghasemkhani, Dandan Qiao, Karthik N. Kannan","doi":"10.2139/ssrn.2794149","DOIUrl":"https://doi.org/10.2139/ssrn.2794149","url":null,"abstract":"This study uses observational data from two online retail sites to examine the effect of questions and answers on sales of experience goods. Particularly, we leverage the naturally occurring experiment where the Q&A capabilities are available on only one platform. Interestingly, we discover that answers, especially the depth of answers, positively affect sales. Additionally, the fraction of questions with at least one answer positively and significantly affects product sales. Our additional textual content analyses unveil that fit- and quality-oriented questions have different effects on sales, as do positive and negative answers. Insights from this work can help platform managers develop Q&A ecosystems and content management policies.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132706337","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}
Drawing upon job embeddedness theory, this paper examines whether network and spatial embeddedness impact direct salespeople’s tendency to remain active or become inactive. Network embeddedness is defined as one’s connection with other salespeople (micro-level), and one’s affiliation to a network family with a view of an overall network (macro-level), including the role of status of network members. Spatial embeddedness examines the role of geographically close salespeople. Leveraging a novel empirical dataset with a proportional hazard model, the results suggest that both micro-and macro-level network embeddedness help decrease salespeople inactivity. The impact of spatial embeddedness, however, varies by network family. Exposure to high-status salespeople also reduces inactivity, especially within the same network. Our results suggest that macro-level network embeddedness has the highest impact on inactivity followed by micro-level embeddedness. Both are higher than the impact of own performance.
{"title":"The Impact of Network and Spatial Embeddedness on Salespeople Inactivity in Direct Selling Organizations","authors":"E. Kim, Puneet Manchanda","doi":"10.2139/ssrn.3725697","DOIUrl":"https://doi.org/10.2139/ssrn.3725697","url":null,"abstract":"Drawing upon job embeddedness theory, this paper examines whether network and spatial embeddedness impact direct salespeople’s tendency to remain active or become inactive. Network embeddedness is defined as one’s connection with other salespeople (micro-level), and one’s affiliation to a network family with a view of an overall network (macro-level), including the role of status of network members. Spatial embeddedness examines the role of geographically close salespeople. Leveraging a novel empirical dataset with a proportional hazard model, the results suggest that both micro-and macro-level network embeddedness help decrease salespeople inactivity. The impact of spatial embeddedness, however, varies by network family. Exposure to high-status salespeople also reduces inactivity, especially within the same network. Our results suggest that macro-level network embeddedness has the highest impact on inactivity followed by micro-level embeddedness. Both are higher than the impact of own performance.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130845018","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}
Although the V-form organization has received attention in light of the integration of blockchain with processes in supply chains, analysis of a V-form organization as a firm in terms of its identity as legal entity has not been considered. Building on the concept of internalization, I reflect upon the efficiency increases the V-form firm can offer to supply chain members. V-form firms can support robust, decentralized markets that use cryptocurrency native to the blockchain with which the supply chain is integrated. Likewise, the V-form firm can provide property within the firm and which the firm is incentivized to protect from predatory intervention. I follow by considering the impact of the V-form firm on institutions adjacent the supply chain. The V-form firm stands to increase the level of competition in the realms of governance and monetary systems, either directly providing alternatives or indirectly influencing existing systems for which it may serve as substitute.
{"title":"On V-form Firms: Governance, Cryptocurrency, and Internalization on the Blockchain","authors":"J. Caton","doi":"10.2139/ssrn.3715053","DOIUrl":"https://doi.org/10.2139/ssrn.3715053","url":null,"abstract":"Although the V-form organization has received attention in light of the integration of blockchain with processes in supply chains, analysis of a V-form organization as a firm in terms of its identity as legal entity has not been considered. Building on the concept of internalization, I reflect upon the efficiency increases the V-form firm can offer to supply chain members. V-form firms can support robust, decentralized markets that use cryptocurrency native to the blockchain with which the supply chain is integrated. Likewise, the V-form firm can provide property within the firm and which the firm is incentivized to protect from predatory intervention. I follow by considering the impact of the V-form firm on institutions adjacent the supply chain. The V-form firm stands to increase the level of competition in the realms of governance and monetary systems, either directly providing alternatives or indirectly influencing existing systems for which it may serve as substitute.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132000563","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}
Investigating a collection of 652 cryptoassets, I find that cryptoasset returns increase with increasing active addresses to network value ratio, a proxy for the value anomaly. Cryptoassets with a high active address to network value ratio yield on average 2.1 percentage points higher weekly returns compared to cryptoassets with low active addresses to network value ratio, and comparable size. Fama-Macbeth regressions indicate that the active addresses to network value ratio, combined with size, and momentum capture the cross-sectional variation of cryptoasset returns. Adding the value factor to existing factor models helps to explain average cryptoasset returns.
{"title":"Is There a Value Premium in Cryptoasset Markets?","authors":"Luca J. Liebi","doi":"10.2139/ssrn.3718684","DOIUrl":"https://doi.org/10.2139/ssrn.3718684","url":null,"abstract":"Investigating a collection of 652 cryptoassets, I find that cryptoasset returns increase with increasing active addresses to network value ratio, a proxy for the value anomaly. Cryptoassets with a high active address to network value ratio yield on average 2.1 percentage points higher weekly returns compared to cryptoassets with low active addresses to network value ratio, and comparable size. Fama-Macbeth regressions indicate that the active addresses to network value ratio, combined with size, and momentum capture the cross-sectional variation of cryptoasset returns. Adding the value factor to existing factor models helps to explain average cryptoasset returns.","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126468236","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}
Individuals are slow to update their beliefs and may respond to new information in idiosyncratic ways. Since their beliefs affect the choices of those they are linked with, the idiosyncrasies that affect their capacity to learn information also affect the accumulation of information across society. I study how an individual’s slowness to respond to new information (due to status quo bias) and idiosyncratic ways of responding to new information (due to overreaction or frustration) affect (a) the ability of society to reach an agreement (b) the ability of society to reach the correct agreement and (c) the speed with which such an agreement is reached. I derive sufficient conditions for convergence in beliefs in the form of network dependent upper bounds on idiosyncrasies for all networks of individuals with heterogeneous biases, placing heterogeneous weights on their neighbours. Then, I highlight that the absence of very connected agents is not sufficient to ensure that beliefs converge to the truth when idiosyncrasies also change with network size. I also show how biases can affect the speed with which societies learn by deriving status quo bias dependent upper bounds on bottlenecks for regular networks. I illustrate how this can be used to bound mixing times and how such analyses can be used to understand and tackle norm persistence. Finally, I simulate the model on real world and artificially generated networks and find that these results are validated.
{"title":"Learning in Networks with Idiosyncratic Agents","authors":"Vatsal Khandelwal","doi":"10.2139/ssrn.3705484","DOIUrl":"https://doi.org/10.2139/ssrn.3705484","url":null,"abstract":"Individuals are slow to update their beliefs and may respond to new information in idiosyncratic ways. Since their beliefs affect the choices of those they are linked with, the idiosyncrasies that affect their capacity to learn information also affect the accumulation of information across society. I study how an individual’s slowness to respond to new information (due to status quo bias) and idiosyncratic ways of responding to new information (due to overreaction or frustration) affect (a) the ability of society to reach an agreement (b) the ability of society to reach the correct agreement and (c) the speed with which such an agreement is reached. I derive sufficient conditions for convergence in beliefs in the form of network dependent upper bounds on idiosyncrasies for all networks of individuals with heterogeneous biases, placing heterogeneous weights on their neighbours. Then, I highlight that the absence of very connected agents is not sufficient to ensure that beliefs converge to the truth when idiosyncrasies also change with network size. I also show how biases can affect the speed with which societies learn by deriving status quo bias dependent upper bounds on bottlenecks for regular networks. I illustrate how this can be used to bound mixing times and how such analyses can be used to understand and tackle norm persistence. Finally, I simulate the model on real world and artificially generated networks and find that these results are validated.<br>","PeriodicalId":319022,"journal":{"name":"Economics of Networks eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125835407","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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