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Tables of Contents for The Economics of Networks

Chapter/Section Title

Page #

Page Count

Foreword

i

2

Patrick Cohendet

Patrick Llerena

Hubat Stahn

Gisele Umbhauer

List of contributions

iii

Introduction

1

14

The economics of networks

1

1

Interaction structure: the role of asymmetries

2

4

Irreversibility, diversity and stability

6

3

Outline of the book

9

6

I Interaction and Macro-Structure: an Overview

15

132

1 Economies with Interacting Agents

17

36

1.1 Introduction

17

3

1.2 Global interaction -- static models with random matching

20

2

1.3 Static models with global stochastic interdependence

22

2

1.4 Global interaction -- dynamic stochastic evolution

24

3

1.5 Technological choice

27

3

1.6 Evolution in games

30

4

1.7 Local interaction: static models

34

1

1.8 The neighbourhood structure of an economy

35

3

1.9 Local interaction: dynamic models

38

4

1.10 Evolving networks

42

2

1.11 Conclusion

44

1

1.12 References

45

8

2 Spatial Interactions in Dynamic Decentralised Economies: a Review

53

40

2.1 Introduction

53

3

2.2 A basic model

56

3

2.2.1 Direct interactions in dynamic economies

56

1

2.2.2 Spatial economies and local interactions

57

2

2.3 Interaction structures with low flexibility

59

13

2.3.1 Markov random fields on integer lattices

60

4

2.3.2 Repeated games on graphs and lattices

64

4

2.3.3 Cellular automata

68

2

2.3.4 `Self-organised criticality' and asymmetric interactions

70

2

2.4 Interaction structures with high flexibility

72

5

2.4.1 Percolation theory

72

1

2.4.2 Stochastic graphs

73

2

2.4.3 Artificial economies

75

2

2.5 Sidde models' drawbacks and `open ended' environments

77

4

2.6 Conclusions

81

1

2.7 References

82

11

3 Network, Interactions between Economic Agents and Irreversibilities: the Case of the Choice among Competing Technologies

93

30

3.1 Introduction

93

2

3.2 Irreversibility on a network of non "localised" agents

95

9

3.2.1 General characteristics of adoption static models

95

1

3.2.2 General characteristics of adoption dynamic models

96

1

3.2.3 The basic model based on the polya urn scheme

97

1

3.2.4 Extensions of the basic model

98

1

3.2.5 Discussions on the behaviors of potential adopters in a network

99

5

3.3 Irreversibility on a network of "localized" agents

104

9

3.3.1 The model of percolation

105

4

3.3.2 Dynamic models of adoption with local influences

109

4

3.4 Conclusion

113

5

3.5 References

118

5

4 Rationality and Heterogeneity in Stochastic Aggregation Models

123

24

4.1 Introduction

124

3

4.2 The non-neutrality of interactions in economic analysis

127

3

4.3 The question of rationality

130

4

4.4 From the question of rationality to the question of heterogeneity

134

4

4.5 Modeling with statistical behavioral functions

138

3

4.6 Conclusion

141

1

4.7 References

142

5

II Local Interaction, Learning and Diversity

147

94

5 Networks Competition under Local Interaction and Behavioral Learning

149

18

5.1 Introduction

149

2

5.2 Variety, standardization and local interaction

151

6

5.2.1 The interaction structure and the game

152

2

5.2.2 Learning and adapting

154

1

5.2.3 The Learning and algorithm

154

3

5.3 Results: local interaction and coordination

157

6

5.3.1 Methodology

157

1

5.3.2 Exploration, path-dependency and the emergence of order

158

2

5.3.3 Learning, standardization and diversity

160

1

5.3.4 The pace of convergence and the emergence of spatial structure

161

2

5.4 Conclusion and implications

163

2

5.5 References

165

2

6 Can Neighborhood Protect Diversity

167

22

6.1 Introduction

167

1

6.2 Pure coordination games and evolutionary processes

168

4

6.3 Global approach

172

5

6.4 Local approach: learning process and diversity

177

3

6.5 Local approach: mutations and diversity

180

6

6.6 Conclusion

186

1

6.7 References

187

2

7 Interactions of Local Interactions: Localized Learning and Network Externalities

189

16

7.1 Introduction

189

2

7.2 The model

191

3

7.2.1 Firms' behavior

191

1

7.2.2 Firm and technology spaces and neighborhoods

192

2

7.3 Results: localized interactions and diversity

194

8

7.3.1 Set-up and methodology

194

1

7.3.2 Global effects of local interactions

195

2

7.3.3 Sorting out individual effects

197

1

7.3.4 Comparison of (G,1) with (3,0)

198

2

7.3.5 Long term spatial structures

200

2

7.4 Conclusion

202

1

7.5 References

203

2

8 Evolution of Cooperation with Local Interactions and Imitation

205

18

8.1 Introduction

205

1

8.2 The prisoner's dilemma game with local interactions and imitation

206

5

8.2.1 Basic assumptions of the model

206

2

8.2.2 The model

208

3

8.3 Stability of cooperation with conditional imitation

211

6

8.3.1 Parametrization of the model

211

1

8.3.2 Aggregate results of the simulations

212

2

8.3.3 Spatial configurations

214

3

8.4 Diffusion and stability of cooperation with pure imitation

217

4

8.4.1 Aggregate results of the simulations

217

2

8.4.2 Spatial configurations

219

2

8.5 Conclusion

221

1

8.6 References

221

2

9 On the Frontier: Structural Effects in a Diffusion Model based on Influence Matrixes

223

18

9.1 Introduction

223

1

9.2 The foundations of the basic model

224

3

9.3 Two kinds of structural effects

227

7

9.3.1 The one standard model

227

2

9.3.2 The two standards model

229

5

9.4 Numerical testing

234

3

9.4.1 Entropy and phase diagram

234

1

9.4.2 The homogeneous case

235

1

9.4.3 Rules for networks generation

236

1

9.4.4 Structural effects

236

1

9.5 Conclusion

237

1

9.6 References

238

3

III Behaviors, Externalities and the Emergence of Networks

241

10 Networks, Specialization and Trust

243

22

10.1 Information intensity and economic viability

243

5

10.2 Surplus creation mechanisms

248

2

10.3 Capital-intensity and mass production

250

2

10.4 Information-intensive production and specialization

252

3

10.5 Network incentives, agent interaction and technological learning

255

6

10.5.1 Incentives and compatibility

255

1

10.5.2 Priority, reciprocity, credit and trust

256

1

10.5.3 Sustainable differentiation revisited: risk sharing and specialization

257

2

10.5.4 Learning and appropriation

259

2

10.6 Conclusion

261

1

10.7 References

262

3

11 Network Externalities, Cost Functions and Standardization

265

18

11.1 Introduction

265

2

11.2 The model

267

1

11.3 Behaviors and equilibrium

267

2

11.4 The existence and uniqueness issues

269

4

11.5 Compatibility and total output: a counter-example

273

7

11.6 Conclusion

280

1

11.7 References

281

2

12 The Emergence of Network Organizations in Processes of Technological Choice: a Viability Approach

283

8

12.1 Introduction

283

1

12.2 The Network constraints

284

1

12.3 Influence matrices describing network organization

285

1

12.4 Organizational niches

286

1

12.5 How network organization evolves

286

1

12.6 Minimizing a static complexity index

287

1

12.7 Minimizing a dynamic complexity index

288

1

12.8 The lock-in property

288

1

12.9 Conclusion

288

1

12.10 References

289

2

13 Are more Informed Agents able to shatter Information Cascades in the Lab?

291

16

13.1 Introduction

291

2

13.2 The Bikhchandani, Hirshleifer and Welch specific model (BHW)

293

3

13.3 The Anderson and Holt experiment

296

2

13.4 Experimental design and theoretical predictions

298

3

13.5 Results

301

3

13.6 Conclusion

304

1

13.7 References

305

2

14 Information Externalities and Learning with Sequential Interactions

307

18

14.1 Introduction

308

1

14.2 The model

309

2

14.3 Equilibrium solutions

311

6

14.3.1 Endogenous timing with two technologies

311

3

14.3.2 Endogenous timing with one technology

314

2

14.3.3 Exogenous timing (with two technologies)

316

1

14.4 Efficiency of imitation

317

6

14.4.1 Average error probability

318

3

14.4.2 Expected social surplus

321

2

14.5 Conclusion

323

1

14.6 References

324

1

15 The Evolution of Imitation

325

15.1 Introduction

325

2

15.2 The basic model

327

5

15.3 Imitation as an evolutionary dynamics

332

5

15.4 Conclusion

337

2

15.5 References

339