Related papers: Rigidity and default in production networks

Modern networks are becoming increasingly interdependent. As a prominent example, the smart grid is an electrical grid controlled through a communications network, which in turn is powered by the electrical grid. Such interdependencies…

We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be…

I study coordination failures in housing development markets with network effects, where the value of building depends on aggregate supply. When network effects are sufficiently strong and convex, multiple equilibria arise: a low-supply…

The transient fluctuation of the prosperity of firms in a network economy is investigated with an abstract stochastic model. The model describes the profit which firms make when they sell materials to a firm which produces a product and the…

This paper analyzes the equilibrium distribution of wealth in an economy where firms' productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, dynasties have linear consumption functions…

We study how firm heterogeneity and market power affect macroeconomic fragility, defined as the probability of long slumps. We propose a theory in which the positive interaction between firm entry, competition and factor supply can give…

We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…

We develop a formalism to study linearized perturbations around the equilibria of a pure exchange economy. With the use of mean field theory techniques, we derive equations for the flow of products in an economy driven by heterogeneous…

A heterogeneous quasi-brittle granular material can withstand certain levels of internal damage before global failure. This robustness depends not just on the bond strengths but also on the topology and redundancy of the bonded contact…

What makes economic and ecological networks so unlike other highly skewed networks in their tendency toward turbulence and collapse? Here, we explore the consequences of a defining feature of these networks: their nodes are tied together by…

Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…

We examine an economy in which interactions are more productive if agents can trust others to refrain from cheating. Some agents are scoundrels, who cheat at every opportunity, while others cheat only if the cost of cheating, a decreasing…

Robustness and cascading failures in interdependent systems has been an active research field in the past decade. However, most existing works use percolation-based models where only the largest component of each network remains functional…

This paper establishes the existence of equilibrium in an economy with production and a continuum of consumers, each of whose incomplete and price-dependent preferences are defined on commodities they may consider deleterious, bads which…

We consider a model of financial contagion in a bipartite network of assets and banks recently introduced in the literature, and we study the effect of power law distributions of degree and balance-sheet size on the stability of the system.…

What happens when employers value worker welfare in frictional labor markets? We show this "responsibility" creates an endogenous wedge in the marginal labor cost -- akin to a hiring subsidy -- altering wage and vacancy incentives rather…

This paper studies the consequences of capturing non-linear dependence among the covariates that drive the default of different obligors and the overall riskiness of their credit portfolio. Joint default modeling is, without loss of…

Extracting from shared resources requires making choices to balance personal profit and sustainability. We present the results of a behavioural experiment wherein we manipulate the default extraction from a finite resource. Participants…

The recent financial crisis has stressed the need to understand financial systems as networks of interdependent countries, where cross-border financial linkages play the fundamental role. It has also been emphasized that the relevance of…

By performing extensive simulations with unprecedentedly large system sizes, we unveil how rigidity influences the fracture of disordered materials. We observe the largest damage in networks with connectivity close to the isostatic point…