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Local Weak Limits for Equilibrium and Risk in Economic Networks

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  • Hamed Amini
  • Zhecheng Wu

Abstract

We study equilibrium and risk evaluation in large sparse economic networks with heterogeneous responses, shocks, and bilateral exposures. Our approach approximates the distribution of equilibrium outcomes through local computations on a limiting rooted network. Under marked local weak convergence, we prove convergence in probability of the empirical equilibrium distribution in two settings: uniformly contractive responses and bounded monotone nonexpansive responses whose lower and upper root iterations coalesce. In the latter setting, the limit is independent of the measurable finite-network equilibrium selection, even when equilibria are not unique. Under bounded domain and continuity assumptions, this convergence extends to law-invariant risk measures, including conditional value-at-risk, with recursion-depth error bounds under additional regularity. Numerical experiments on production networks and payment clearing systems illustrate the accuracy and computational benefits of the local approximation.

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  • Hamed Amini & Zhecheng Wu, 2026. "Local Weak Limits for Equilibrium and Risk in Economic Networks," Papers 2609.27107, arXiv.org.
  • Handle: RePEc:arx:papers:2609.27107
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    References listed on IDEAS

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