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NEXT - Workshop on Networks and Externalities

Budapest, 26-27 May 2014


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Program

Please check the program for last minute changes. The abstracts of the presentations are at the end of the program.

Monday, 26 May 2014

9:30-9:50 Registration

9:50-10:00 Opening speech

10:00-11:00 Session 1

Hubert Kiss: A Markov chain based dynamic model of bank runs

Gergely Horváth: When does observing other depositors lead to a bank run?

11:00-11:30 Coffee break

11:30-12.30 Session 2

Lars Ehlers: Strategy-Proofness and Essentially Single-Valued Cores Revisited

Ruben Juarez: Strategy-proof resource allocation on a network

12:30-14:00 Lunch break

14:00-15:00 Invited talk 1

Bhaskar Dutta: The Formation of Partnerships in Social Networks

15:00-15:30 Coffee break

15:30-16:30 Session 3

László Kóczy: A risk-based core

Péter Csóka: Risk Capital Allocation in Networks

19:00-22:00 Dinner

Bodrogi Étterem

Tuesday, 27 May 2014

9:30-10:30 Invited talk 2

Herbert Hamers: Networks and terrorism: on structure and importance

10:30-11:00 Coffee break

11:00-12:30 Session 4

Alexandru Nichifor: Targeted vs. Collective Information Sharing in Networks

Ugo Bolletta: Endogenous Peer Group Formation and Peer Effects

Artur Tomaszewski: A Bargaining Set Model as a Tool for evaluating Share Split in a Merger

12:30-14:00 Lunch break

14:00-15:00 Invited talk 3

Walid Saad: Matching and Cooperation in Wireless and Communication Networks

15:00-15:30 Coffee break

15:30-16:30 Session 5

Dávid Csercsik: Enhancing stability in cooperative traffic routing games on scale free wireless networks

Mária Csanádi: The Interactive party-state (IPS) model

Abstracts

Alexandru Nichifor: Targeted vs. Collective Information Sharing in Networks

We introduce a simple two-stage game of endogenous network formation and information sharing for reasoning about the optimal design of social networks like Facebook or Google+. We distinguish between unilateral and bilateral connections and between targeted and collective information sharing. Agents value being connected to other agents and sharing and receiving information. We consider multiple utility specifications. We show that the game always has an equilibrium in pure strategies and then we study how the network design and the utility specifications affect welfare. Surprisingly, we  find that in general, targeted information sharing is not necessarily better than collective information sharing. However, if all agents are either \babblers" or \friends", irrespective of
whether the network is unilateral or bilateral, in equilibrium, targeted information sharing
yields higher welfare than collective information sharing.

Artur Tomaszewski: A Bargaining Set Model as a Tool for evaluating Share Split in a Merger

Value maximization is nowadays each company’s goal. A firm can reach this by either increasing its potential (internal increase) or by collaborating with other companies external increase). In a merger two firms make a decision to found a new joint-stock company. Shareholding of the new firm is divided between its owners. The founders carry out various negotiation talks and reach some share split agreement. The challenge in this article is to use one of the game theory models to calculate a fair (for both partners) share split.
In the literature one can find various examples of possible applications of theory of games
to mergers and acquisitions. However, hardly anybody deals with topic of finding a fair shareholding structure. This article presents one of the game theory models (namely a bargaining set model) as a tool for assessing fair share split in a new joint-stock company.
In this article two merged European airlines: KLM Dutch Airlines and Air France are subject of research. Their actual shareholding agreement is compared to the share split results obtained in the study. In the paper one creates three and four-player bargaining sets with a third (British Airways) and fourth (Iberia) company. One sets a play, where several two-player mergers are possible and each firm can decide who to merge with. With use of synergistic gains method, one obtains a predicted market value of each merger. The outcomes are then put into the language of the bargaining set model. The final results indicate that the model can be a helpful tool in reaching an agreement on a fair (in terms of the model) share split in merger negotiations.

Ugo Bolletta: Endogenous Peer Group Formation and Peer Effects

This paper studies a network game where players choose simultaneously behaviours and reference groups. The game is represented through a static linear economy with local interactions. The equilibrium is worked out in two stages where optimal behaviours are evaluated for different structures
of networks. Players are more willing to form links with similar peers, and this reduces substantially the set of multiple equilibria. The network in equilibrium is determined  nding the stable network through the concept of Pairwise Nash Stability. The model exhibits interesting features: best reply functions can be expressed as the linear-in-means model by Manski (1993), and I show that identi cation of peer e ects is successful only assuming the complete network. Moreover, analysing equilibrium behaviours I find a relationship between reference group sizes and diversity of players. The more a population is heterogeneous the less are the connections. On the other hand peer e ects increase with increasing number of connections. Therefore there is a trade-off  between peer effects achievable through reallocation of agents into groups and endogenous responses to the reallocation itself, because of strategic link formation. It arises the implication that in order to  nd the optimal composition of groups that is able to foster peer e ects, endogenous group formation analysis is crucial. Then I apply the results of the model to Carrell, Sacerdote, West (2013) and find that if low achievement students are matched with high achievement students (bimodal groups) it is really likely that two subgroups will take place in
equilibrium generating two segregated groups where peer effects are not present. The optimal policy involves therefore the presence of medium achievement students.

Mária Csanádi: The Interactive party-state (IPS) model

A comparative analytical model describes the structure, operation and transformation of party-state systems. This model is called Interactive Party-state model (IPS) (Csanádi, 1997, 2006). The model is based on the dependency and interest promotion relationships among party- state- and economic decision-makers during the decision-making process. The model incorporates the interactive network these relationships form, its main elements, main connecting and operating principles. It describes the selection system in the distribution of resources based on the political rationality of the structure and operation of the network. It analyzes the adapting behavior and interest of decision-makers that leads to the cohesion and self-reproduction of the network. It also deals with the main endogenous structural and behavioral traps embodied by the political rationality of economic behavior during self-reproduction of the network that incites system transformation. The model describes the above structural and operational characteristics as self-similar traits of the network in space, time and aggregation levels. But it also describes the structural background of the disparities in self-reproduction and transformation, based on the different distributions of power within the network despite self-similarities. These different distributions of power will have an impact on the different pace, sequence and conditions of system transformation and consequently, on the varieties of the emerging new system.

Bhaskar Dutta: The Formation of Partnerships in Social Networks

Agents use social networks to exchange favors, information, etc. Reciprocity is a key determinant of whether partnerships are formed or not. In this paper, we explore the structure of networks which support efficient formation of partnerships.

Dávid Csercsik: Enhancing stability in cooperative traffic routing games on scale free wireless networks

Local routing protocols in scale free networks have been extensively studied. We consider a wireless contextualization of this routing problem and analyze on the one hand how cooperation affects network efficiency, and on the other hand the stability of cooperation structures. Cooperation is interpreted as local exchange of topological information between cooperating agents, and the payoff of a certain node is defined based on its energy consumption during the routing process. We show that if the payoff of the nodes is the energy saving compared to the all-singleton case, basically coalitions are not stable. We introduce coalitional load balancing and net reward to enhance coalitional stability and thus the more efficient operation of the network. As in the proposed model cooperation strongly affects routing dynamics of the network, externalities will arise and the game is defined in a partition function form.

Péter Csóka: Risk Capital Allocation in Networks

Risk allocation games are cooperative games that are used to attribute the risk of a financial entity to its subunits. In this paper, we extend the literature on risk allocation games by incorporating the situation when agents have mutual claims on each other, represented by a network. The definition of a risk allocation game in a network is not straightforward, since the presence of the network leads to externalities. The results can be used to help identifying systematically important financial institutions.
This work was partially supported by the European Union and the European Social Fund through project FuturICT.hu (grant no.: TAMOP-4.2.2.C-11/1/KONV-2012-0013).

Lars Ehlers: Strategy-Proofness and Essentially Single-Valued Cores Revisited

We consider general allocation problems with indivisibilities where agents' preferences possibly exhibit externalities. In such contexts many different core notions were proposed. One is the gamma-core whereby blocking is only allowed via allocations where the non-blocking agents receive their endowment. We show that if there exists an allocation rule satisfying individual rationality, efficiency, and strategy-proofness, then for any problem for which the   gamma-core is non-empty, the allocation rule must choose a  gamma-core allocation and all agents are indifferent between all allocations in the gamma-core. We apply our result to housing markets, coalition formation and networks.

Herbert Hamers: Networks and terrorism: on structure and importance

All over the world intelligence services are collecting data concerning possible terrorist threats. This information is usually transformed into network structures in which the nodes represent the individuals in the data set and the links possible connections between these individuals.
First we will discuss the structures of these networks. Every covert organization faces the constant dilemma of staying secret and ensuring the necessary coordination between its members. Using elements from multi-objective optimization and bargaining game theory we analyze which communication structures are optimal in the sense of providing a balanced tradeoff between secrecy and operational efficiency. For several different secrecy and information scenarios this tradeoff is analyzed considering the set of connected graphs of given order as possible communication structures. Second, we focus on a methodology that ranks terrorists in a network. This methodology is based on a game theoretic centrality measure, which is innovative in the sense that it takes into account not only the structure of the network but also individual and coalitional characteristics of the members of the network. Moreover, we perform a sensitivity analysis on the rankings derived from the centrality measure for the case of Al Qaeda’s 9/11 attack. In this sensitivity analysis we consider firstly the possible additional information available about members of the network, secondly, variations in relational strength and, finally, the absence or presence of a small percent age of links in the network.

Gergely Horváth: When does observing other depositors lead to a bank run?

Empirical descriptions and studies suggest that generally depositors observe a sample of previous decisions before deciding if to keep their funds deposited or to withdraw. These observed decisions may exhibit di erent degrees of correlation across depositors. We study the e ect of the correlation in samples on the likelihood of bank runs assuming that the depositors use a threshold decision rule. Theoretically, with highly correlated samples and in nite depositors runs occur with certainty, while with independent samples it needs not be the case. For many parameter settings, the likelihood of bank runs is less than one. To investigate the intermediate cases, we use simulations and  nd that decreasing the correlation reduces the likelihood of bank runs, often in a non-linear way. We also study the e ect of the sample size and show that increasing it makes bank runs less likely. Our results have relevant policy implications.

Ruben Juarez: Strategy-proof resource allocation on a network

Agents care about the amount of money they receive as well as the amounts that their neighbours receive. The existence (or non-existence) of a link between a pair of agents is private information of these two agents. We introduce and characterize the class of strategy-proof mechanisms for di erent shapes in the utility function. We compute the in effciency of these mechanism using the worst absolute surplus loss. The optimal mechanism using this measure is provided for an additive utility function.

Hubert Kiss: A Markov chain based dynamic model of bank runs

We propose a discrete time probabilistic model of depositor behavior which takes into account the information flow among depositors. In each time step each depositors current state is determined in a stochastic way, based on its previous state, the state of other depositors and the strategy of the bank. The bank may offer payments for impatient depositors, who accept or decline these offers with certain probability. The connections of depositors affect the evolution of the state trajectory as well: If high number of other depositors I know are demanding moneyfrom the bank, I'll turn also impatient with higher probability.Considering a proposed model, it makes sense to ask, what is the optimal strategy of the bank to propose offers if he wants to keep the expected chance of a bank run under a certain level, and minimize his expected cost. We show that in the case of the proposed model this question results in a nonlinear optimization problem with nonlinear constraints.

László Kóczy: A risk-based core

In partition function form games the value of a coalition depends on the entire partition. As a result, a deviating coalition can only form expectations regarding its post-deviation payoff as the latter is a function of the induced residualartition. Existing literature approached the problem from the side of conservativism, assuming the worst often completely ignoring the interests of the residual players. We borrow the idea of risk from the finance literature and compare the risk of staying with the original partition with the risk of deviating. Employing this idea to the core leads to a new concept that we call the risk-based core. We introduce this concept and discuss its properties.

Walid Saad: Matching and Cooperation in Wireless and Communication Networks

Next-generation networked systems are characterized by three key features: heterogeneity, in terms of technology and devices, dynamics, in terms of rapidly varying environments and uncertainty, and size, in
terms of number of users, nodes, and services. The need for smart, self-organizing, and autonomic network designs has become a central research issue in a variety of applications and scenarios. This is of particular importance in large-scale networks such as heterogeneous wireless cellular networks in which a myriad of devices must be able to interact, co-exist, cooperate, and deliver high-quality services to users. Incorporating self-organizing and cooperative capabilities in such heterogeneous networked systems motivates the development of innovative analytical techniques. In this respect, game-theoretic techniques, such as matching theory and cooperative games, are expected to play a critical role towards deploying intelligent, distributed, and flexible wireless systems in which network devices can make self-organize into proper network configurations, in order to optimize the overall quality-of-service. To this end, this talk will particularly focus on the applications of matching theory and cooperative games in two emerging fields: (i)-  heterogeneous and cognitive wireless networks and (ii)- wireless security.

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Utolsó módosítás: 2014. 06. 30.