Essays on financial and economic networks

This thesis aims at discerning connections’ effects in inter-connected multi-agent networks questioning how the number and intensity of these connections shape agents’ utility. The theoretical and empirical essays presented herein shed light on the consequences of keeping strong relationships with different number of agents. Chapter 1 analyzes the type of networks that emerge in the long run when heterogeneous agents form a set of connections that allows them to trade, create and share a generated surplus derived from trade. Chapter 2 focuses on players’ incentives to link other players in order to trade illegal goods when doing so entails an assignment of a positive probability to be arrested by the police. A trade-off between players’ incentives to participate in the trade and the expected fine in case they are arrested is presented. Chapter 3 examines whether firms keeping a strong relationship with their lender(s) obtain a higher and cheaper access to credit than otherwise, and evaluates whether the direction of these effects differ depending on the type of financial institutions firms keep a relationship with. Last, Chapter 4 looks at firms’ alternative scheme to obtain credit by collectively applying for credit instead of applying directly. Firms’ financial needs to jointly apply for credit are analyzed together with the dissimilar consequences of joining some firms instead of others and the outcomes of using the same vs. several banks for different purposes.