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Economic Networks: What do we know and what do we need to know?

  • Frank Schweitzer


  • Giorgio Fagiolo
  • Didier Sornette
  • Fernando Vega-Redondo
  • Douglas R. White

We examine the emergent field of economic networks and explore its ability to shed light on the global and volatile economy where credit, ownership, innovation, investment, and virtually every other economic activity is carried at a scale and scope that respects no geographical, organizational, or political boundaries. In this context, the study of economic networks and their dynamics must reflect the vast complexity of the interaction patterns and integrate it with a realistic account of the incentives and information that govern agents' behavior. The interplay of both has been shown to produce metastabilities, system crashes, and emergent structures in ways that are yet only poorly understood. Meeting this exciting scientific challenge requires a combination of time series analysis, complexity theory, and simulation with the analytical tools that have been developed by game theory, as well as graph and matrix theories. We argue that this will help achieving a better integration of theory and data models and provide a better understanding of the potentials and risks of modern economic systems.

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Paper provided by ETH Zurich, Chair of Systems Design in its series Working Papers with number CCSS-09-010.

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Publication status: Published
Handle: RePEc:stz:wpaper:ccss-09-010
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  1. J. B. Glattfelder & S. Battiston, 2009. "Backbone of complex networks of corporations: The flow of control," Papers 0902.0878,, revised Aug 2009.
  2. Fagiolo, Giorgio & Reyes, Javier & Schiavo, Stefano, 2008. "On the topological properties of the world trade web: A weighted network analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(15), pages 3868-3873.
  3. Iori, Giulia & Jafarey, Saqib, 2001. "Criticality in a model of banking crises," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 205-212.
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  5. Jan Lorenz & Stefano Battiston & Frank Schweitzer, . "Systemic Risk in a Unifying Framework for Cascading Processes on Networks," Working Papers CCSS-09-011, ETH Zurich, Chair of Systems Design.
  6. M. Serrano & Marián Boguñá & Alessandro Vespignani, 2007. "Patterns of dominant flows in the world trade web," Journal of Economic Interaction and Coordination, Springer, vol. 2(2), pages 111-124, December.
  7. Battiston, Stefano & Delli Gatti, Domenico & Gallegati, Mauro & Greenwald, Bruce & Stiglitz, Joseph E., 2007. "Credit chains and bankruptcy propagation in production networks," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 2061-2084, June.
  8. Hagedoorn, John, 2002. "Inter-firm R&D partnerships: an overview of major trends and patterns since 1960," Research Policy, Elsevier, vol. 31(4), pages 477-492, May.
  9. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
  10. Gallegati, Mauro & Keen, Steve & Lux, Thomas & Ormerod, Paul, 2006. "Worrying trends in econophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 1-6.
  11. Yaron Leitner, 2005. "Financial Networks: Contagion, Commitment, and Private Sector Bailouts," Journal of Finance, American Finance Association, vol. 60(6), pages 2925-2953, December.
  12. J. Doyne Farmer, 1999. "Physicists Attempt to Scale the Ivory Towers of Finance," Working Papers 99-10-073, Santa Fe Institute.
  13. Frank Schweitzer & Giorgio Fagiolo & Didier Sornette & Fernando Vega-Redondo & Douglas R. White, 2009. "Economic Networks: What Do We Know And What Do We Need To Know?," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 12(04), pages 407-422.
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  16. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
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  19. Brock, W A, 1999. "Scaling in Economics: A Reader's Guide," Industrial and Corporate Change, Oxford University Press, vol. 8(3), pages 409-46, September.
  20. Tiziana Di Matteo & Tomaso Aste, 2007. "“No Worries": Trends in Econophysics," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 55(2), pages 121-122, 01.
  21. Callander, Steven & Plott, Charles R., 2005. "Principles of network development and evolution: an experimental study," Journal of Public Economics, Elsevier, vol. 89(8), pages 1469-1495, August.
  22. Andrea Galeotti & Sanjeev Goyal & Jurjen Kamphorst, 2003. "Network Formation with Heterogeneous Players," Economics Discussion Papers 562, University of Essex, Department of Economics.
  23. D. Garlaschelli & M. I. Loffredo, 2005. "Structure and Evolution of the World Trade Network," Papers physics/0502066,, revised May 2005.
  24. Alan Kirman, 1997. "The economy as an evolving network," Journal of Evolutionary Economics, Springer, vol. 7(4), pages 339-353.
  25. J. Reichardt & D. R. White, 2007. "Role models for complex networks," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 60(2), pages 217-224, November.
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