Abstract
We develop complex networks that represent activities in the economy. The network in this study is constructed from firms and the relationships between firms, i.e., shareholding, interlocking directors, transactions, and joint applications for patents. Thus, the network is regarded as a multigraph, and it is also regarded as a weighted network. By calculating various network indices, we clarify the characteristics of the network. We also consider the dynamics of firms in the production space that are characterized by capital stock, employment, and profit. Each firm moves within this space to maximize their profit by using controlling of capital stock and employment. We show that the dynamics of rational firms can be described using a ridge equation. We analytically solve this equation by assuming the extensive Cobb-Douglas production function, and thereby obtain a solution. By comparing the distribution of firms and this solution, we find that almost all of the 1,100 firms listed on the first section of the Tokyo stock exchange and belonging to the manufacturing sector are managed efficiently.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Aoyama H, et al. (2007) The production function and the ridge theory of firms. in preparation
Aoyama H, Kikuchi H (1992) A new valley method for instanton deformation. Nuclear Physics B 369: 219–234
Battiston S, Bonabeau E, Weisbuch G (2003) Decision making dynamics in corporate boards. Physica A 322: 567–582
Cobb CW, Douglas PH (1928) A theory of production. American Economic Review 18: 139–165
Davis G, Yoo M, Baker WE (2003) The small world of the American corporate elite, 1982–2001. Strategic Organization 3: 301–326
Garlaschelli D, et al. (2003) The scale-free topology of market investments. Physica A 350: 491–499
Li X, Jin YY, Chen G (2003) Complexity and synchronization of the World trade Web. Physica A 328: 287–296
Li X, Jin YY, Chen G (2004) On the topology of the world exchange arrangements web. Physica A 343: 573–582
Souma W, Fujiwara Y, Aoyama H (2003) Complex networks and economics. Physica A 324: 396–401
Souma W, Fujiwara Y, Aoyama H (2004) Random matrix approach to shareholding networks. Physica A 344: 73–76
Souma W, Fujiwara Y, Aoyama H (2005) Heterogeneous economic networks. In: Namatame A, et al. (Eds.) The Complex Networks of Economic Interactions: Essays in Agent-Based Economics and Econophysics (Lecture Notes in Economics and Mathematical Systems, Vol. 567), Springer-Verlag, Tokyo, pp. 79–92
Souma W, Fujiwara Y, Aoyama H (2005) Shareholding networks in Japan. In: Mendes JFF, et al. (Eds.) Science of Complex Networks: From Biology to the Internet And WWW CNET2004 (API Conference Proceedings, Vol. 776), Melville, New York, pp. 298–307.
Souma W, et al. (2006) Correlation in business networks. Physica A 370: 151–155
Varian H.R (1992) Microeconomic Analysis-Third edition. W. W. Norton & Company, Inc.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2007 Springer-Verlag Italia
About this chapter
Cite this chapter
Souma, W. (2007). Networks of Firms and the Ridge in the Production Space. In: Chatterjee, A., Chakrabarti, B.K. (eds) Econophysics of Markets and Business Networks. New Economic Windows. Springer, Milano. https://doi.org/10.1007/978-88-470-0665-2_11
Download citation
DOI: https://doi.org/10.1007/978-88-470-0665-2_11
Publisher Name: Springer, Milano
Print ISBN: 978-88-470-0664-5
Online ISBN: 978-88-470-0665-2
eBook Packages: Physics and AstronomyPhysics and Astronomy (R0)