The Asymmetric Effect of Diffusion Processes: Risk Sharing and Contagion
AbstractWe provide a general characterization of diffusion processes, allowing to analyze both risk-sharing and contagion at the same time. We show that interdependencies are beneficial when the economic environment is favorable, and detrimental when the economic environment deteriorates. The risk of contagion increases the volatility of outcome and thus reduces the ability of the network to provide risk-sharing.
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Bibliographic InfoPaper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 71.
Date of creation: 2007
Date of revision:
Risk-sharing; Contagion; Networks.;
Other versions of this item:
- Gallegati Mauro & Greenwald Bruce & Richiardi Matteo G & Stiglitz Joseph E., 2008. "The Asymmetric Effect of Diffusion Processes: Risk Sharing and Contagion," Global Economy Journal, De Gruyter, vol. 8(3), pages 1-22, September.
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
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