We simulate social network games of a portfolio selection to analyze how knowledge, preferences of agents and their level of omniscience affect their decision-making. The key feature of the paper is that preferences and the level of omniscience of agents very much determine the ways agents make their decision. While omniscient agents respond very rapidly to the changing market conditions, non-omniscient agents are more resistant to such changes. By introducing one-time shock, we found that its efficiency depends on the level of omniscience of agents, with much stronger efficiency under omniscient agents.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
13567.
Find related papers by JEL classification: G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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Dilip Abreu & Markus K. Brunnermeier, 2003.
"Bubbles and Crashes,"
Econometrica,
Econometric Society, vol. 71(1), pages 173-204, January.
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