Persuasion on Networks

Georgy Egorov (Northwestern University)
Konstantin Sonin (University of Chicago)

Abstract : We analyze persuasion in a model, in which each receiver (of many) might buy a direct access to the sender's signal or to rely on her network connections to get the same information. For the sender, a more biased signal increases the impact per subscriber (direct receiver), yet diminishes the willingness of agents to become subscribers. Contrary to the naive intuition, the optimal propaganda might target peripheral, rather than centrally located agents, and is at its maximum level when the probability that information flows between agents is either zero, or nearly one, but not in-between. The density of the network has a non-monotonic effect on the optimal level of propaganda as well.

Corporate Capture of Blockchain Governance

Daniel Ferreira (London School of Economics)
Jin Li (Hong Kong University)
Radoslawa Nikolowa (Queen Mary University of London)

Abstract : We develop a theory of blockchain governance. In our model, the proof-of-work system, which is the most common set of rules for validating transactions in blockchains, creates an industrial ecosystem with specialized suppliers of goods and services. We analyze the two-way interactions between blockchain governance and the market structure of the industries in the blockchain ecosystem. Our main result is that the proof-of-work system leads to a situation where the governance of the blockchain is captured by a large firm.

Social Network, Career Incentive and Interregional Trade in China

Erqi GE (Universitat Pompeu Fabra)

Abstract : Contrary to the large number of studies that examine the role of political leaders in economic growth and international trade, less attention has been paid to their impact on domestic trade, particularly in places where general elections are absent. This paper aims to fill in this gap by focusing on how the career incentives and social networks of local leaders influence interregional trade in China. Results using data on interregional railway cargo from 2004 to 2015 contrast the common understanding that career incentives mobilize the local leaders to implement policies beneficial to local economic growth. Rather, promotion tournament between local leaders actually becomes a new type of trade cost and decreases trade between competitors. However, social networks among local leaders instead help to reduce trade costs and increase the trade volumes between connected regions. This effect is induced by both higher social trust and political in-group favoritism. Furthermore, study of the content of articles published in government-owned newspapers reveals that connection and competition between local leaders also affect the number of articles on interregional economic activities, providing direct evidence of the efforts of local leaders to push the interregional economic cooperation with different regions. Finally, we find that local leaders with greater career concerns are more likely to put into place import restrictions to help local firms grow.