Related papers: Rigidity and default in production networks
The dynamics of collaboration networks of firms follow a life-cycle of growth and decline. That does not imply they also become less resilient. Instead, declining collaboration networks may still have the ability to mitigate shocks from…
Most products are produced and sold by supply chain networks, where an interconnected network of producers and intermediaries set prices to maximize their profits. I show that there exists a unique equilibrium in a price-setting game on a…
We reveal significant qualitative differences in the rigidity transition of three types of disordered network materials: randomly diluted spring networks, jammed sphere packings, and stress-relieved networks that are diluted using a…
In classical contagion models, default systems are Markovian conditionally on the observation of their stochastic environment, with interacting intensities. This necessitates that the environment evolves autonomously and is not influenced…
A detailed empirical analysis of the productivity of non financial firms across several countries and years shows that productivity follows a non-Gaussian distribution with power law tails. We demonstrate that these empirical findings can…
The global decline in the labor income share has challenged the classical Kaldor facts; however, the macroeconomic aggregation mechanism -- namely, how aggregate factor shares emerge from firm-level heterogeneity -- remains underexplored.…
We derive the default cascade model and the fire-sale spillover model in a unified interdependent framework. The interactions among banks include not only direct cross-holding, but also indirect dependency by holding mutual assets outside…
This paper characterizes the probability of a market failure defined as the default of two or more globally systemically important banks (G-SIBs) in a small interval of time. The default probabilities of the G-SIBs are correlated through…
The seniority of debt, which determines the order in which a bankrupt institution repays its debts, is an important and sometimes contentious feature of financial crises, yet its impact on system-wide stability is not well understood. We…
We show that a simple and intuitive three-parameter equation fits remarkably well the evolution of the gross domestic product (GDP) in current and constant dollars of many countries during times of recession and recovery. We then argue that…
We study how governments promote social welfare through the design of contracting environments. We model the regulation of contracting as default delegation: the government chooses a delegation set of contract terms it is willing to…
Large scale networks delineating collective dynamics often exhibit cascading failures across nodes leading to a system-wide collapse. Prominent examples of such phenomena would include collapse on financial and economic networks.…
This paper examines the value of storage in securing reliability of a system with uncertain supply and demand, and supply friction. The storage is frictionless as a supply source, but once used, it cannot be filled up instantaneously. The…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…
This paper incorporates fixed capital into a multi-sectoral input-output model to reassess the Okishio Theorem. We establish the existence of a critical wage elasticity strictly less than unity, beyond which cost-reducing technical progress…
Network theory is rapidly changing our understanding of complex systems, but the relevance of topological features for the dynamic behavior of metabolic networks, food webs, production systems, information networks, or cascade failures of…
In the context of micro-finance, a group of individuals undertake business projects that may interfere with one another. A contagious default happens if one person's project failure leads to the default of another group member. In this…
Cascading failures and epidemic dynamics, as two successful application realms of network science, are usually investigated separately. How do they affect each other is still one open, interesting problem. In this letter, we couple both…
We study numerically the cascading failure problem by using artificially created scale-free networks and the real network structure of the power grid. The capacity for a vertex is assigned as a monotonically increasing function of the load…