Network Formation with Local Complements and Global Substitutes: The Case of R&amp;D Networks

Hsieh, Chih‐Sheng; König, Michael; Liu, Xiaodong

doi:10.2139/ssrn.2917560

Cited by 7 publications

(15 citation statements)

References 187 publications

(154 reference statements)

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“…The existence of a potential in the current work leads to the Gibbs equilibrium measure 3 and thus is fully integrated into the realm of statistical mechanics. Until [15], twelve years after [6], no other works had connected potential games to Gibbs equilibrium measures, although some had come close [16,17], [18], [19]. Others have used mean-field Curie-Weiss models to model socio-economic interactions [20].…”

Section: Other Workmentioning

confidence: 99%

“…, ∂V/∂x N ), and the w a vector of N standard Wiener processes which are identical and independent across agents and time. Furthermore, the increments w i (t) − w i (s), have mean zero, variance t − s, and reflecting boundary conditions 15 are used. The matrix r is used for reflections at the boundary, and z(t) is a process that only changes on the boundary for reflection.…”

Section: Bounded Rationalitymentioning

confidence: 99%

“…Note that agents are only playing pure strategies in these dynamics 15. We use a normal reflection vector field on the boundary ∂Φ Λ as in[26].…”

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confidence: 99%

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An elementary humanomics approach to boundedly rational quadratic models

Campbell

Smith

2021

Physica A: Statistical Mechanics and its Applications

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We take a refreshing new look at boundedly rational quadratic models in economics using some elementary modeling of the principles put forward in the book Humanomics by Vernon L. Smith and Bart J. Wilson. A simple model is introduced built on the fundamental Humanomics principles of gratitude/resentment felt and the corresponding action responses of reward/punishment in the form of higher/lower payoff transfers. There are two timescales: one for strictly self-interested action, as in economic equilibrium, and another governed by feelings of gratitude/resentment. One of three timescale scenarios is investigated: one where gratitude/resentment changes much more slowly than economic equilibrium ("quenched model"). Another model, in which economic equilibrium occurs over a much slower time than gratitude/resentment evolution ("annealed" model) is set up, but not investigated. The quenched model with homogeneous interactions turns out to be a non-frustrated spin-glass model. A twoagent quenched model with heterogeneous aligning (ferromagnetic) interactions is analyzed and yields new insights into the critical quenched probability p (1 − p) that represents the empirical frequency of opportunity for agent i to take action for the benefit (hurt) of other that invokes mutual gratitude (resentment). A critical quenched probability p * i , i = 1, 2, exists for each agent. When p < p * i , agent i will choose action in their self-interest. When p > p * i , agent i will take action sensitive to their interpersonal feelings of gratitude/resentment and thus reward/punish the initiating benefit/hurt. We find that the p * i are greater than one-half, which implies agents are averse to resentful behavior and punishment. This was not built into the model, but is a result of its properties, and consistent with Axiom 4 in Humanomics about the asymmetry of gratitude and resentment. Furthermore, the agent who receives less payoff is more averse to resentful behavior; i.e., has a higher critical quenched probability. For this particular model, the Nash equilibrium has no predictive power of Humanomics properties since the rewards are the same for self-interested behavior, resentful behavior, and gratitude behavior. Accordingly, we see that the boundedly rational Gibbs equilibrium does indeed lead to richer properties.

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Section: Other Workmentioning

confidence: 99%

Section: Bounded Rationalitymentioning

confidence: 99%

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An elementary humanomics approach to boundedly rational quadratic models

Campbell

Smith

2021

Physica A: Statistical Mechanics and its Applications

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“…Contemporary papers to propose econometric treatment of models of networks and actions are those of Goldsmith-Pinkham and Imbens (2013) and Hsieh and Lee (2014). The focus of their work, however, is not policy analysis, which permits them to avoid the equilibrium microfoundations of a strategic model and an explicit treatment of the possibility for multiplicity.…”

Section: Related Literaturementioning

confidence: 99%

Discrete Games in Endogenous Networks: Equilibria and Policy

Badev

2017

Preprint

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I postulate that social norms and individuals' behaviors are shaped by a common process capable of generating a multitude of outcomes. In games of friendship links and behaviors, I propose k-player Nash stability-a family of equilibria, indexed by a measure of robustness given by the number of permitted link changes, which is (ordinally and cardinally) ranked in a probabilistic sense. Application of the proposed framework to adolescents' tobacco smoking and friendship decisions suggests that: (a.) friendship networks respond to increases of tobacco prices and this response amplifies the intended policy effect on smoking, (b.) racially desegregating high-schools, via stimulating the social interactions of students with different intrinsic propensity to smoke, decreases the overall smoking prevalence, (c.) adolescents are averse to sharing friends so that there is a rivalry for friendships, (d.) when data on individuals' friendship network is not available, the importance of price centered policy tools is underestimated.

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“…In contrast, the framework proposed in Boucher (2016) is microfounded as a particular equilibrium in a noncooperative model of friendships and behaviors. Related work by Hsieh, König, and Liu (2016) proposes a two‐stage estimation procedure, with an application to R and D, which relies on the conditional independence of links obtained from assuming away link externalities. Canen, Trebbi, and Jackson (2016) proposed an empirically tractable framework, building on Cabrales, Calvó‐Armengol, and Zenou (2011), where politicians choose both socialization and legislation efforts, and study bill cosponsorship in the U.S. Congress 10 .…”

Section: Introductionmentioning

confidence: 99%

Nash Equilibria on (Un)Stable Networks

Badev

2021

ECTA

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In response to a change, individuals may choose to follow the responses of their friends or, alternatively, to change their friends. To model these decisions, consider a game where players choose their behaviors and friendships. In equilibrium, players internalize the need for consensus in forming friendships and choose their optimal strategies on subsets of k players—a form of bounded rationality. The k‐player consensual dynamic delivers a probabilistic ranking of a game's equilibria, and via a varying k, facilitates estimation of such games. Applying the model to adolescents' smoking suggests that: (a) the response of the friendship network to changes in tobacco price amplifies the intended effect of price changes on smoking, (b) racial desegregation of high schools decreases the overall smoking prevalence, (c) peer effect complementarities are substantially stronger between smokers compared to between nonsmokers.

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Network Formation with Local Complements and Global Substitutes: The Case of R&D Networks

Cited by 7 publications

References 187 publications

An elementary humanomics approach to boundedly rational quadratic models

An elementary humanomics approach to boundedly rational quadratic models

Discrete Games in Endogenous Networks: Equilibria and Policy

Nash Equilibria on (Un)Stable Networks

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