Essays in network economics

Abstract

This thesis is a collection of three chapters, each representing an individual paper. The first chapter studies how the formation of supply chains affects economic growth. It provides a new tractable model for supply chain formation. The main innovation in this model is that, firms can choose suppliers to maximize profits. Individual firms' actions determine the equilibrium input-output network, and affect macroeconomic variables such as GDP. We then apply this model to understand the effect of changing supply chains on American productivity during the 1987-2007 period. The second chapter studies how a monopolist may sell multiple goods to strategic bidders. The monopolist may face a series of combinatorial constraints. For example, it may be forced to allocate at most one good to each bidder, and it may have additional constraints on which bidders can be allocated which goods. Furthermore, the monopolist does not know bidders' demand distributions. Rather, it only knows one sample from the demand distribution corresponding to each bidder. Nevertheless, by developing new online optimization algorithms, we show how simple mechanisms can approximate the monopolist's optimal revenue. Finally, the third chapter, develops a new model of firm optimization to understand how shrinking electronics have contributed to increased productivity and welfare in the United States, during the 2002-2017 period. In this model, firms face constraints on the size of the products they can build. As intermediate inputs, such as electronics, shrink, the firms' production possibilities frontier expands, and GDP increases.