Risk aversion and social networks
Agents involved in the formation of a social or economic network typically face uncertainty about the benefits of creating a link. However, the interplay of such uncertainty and risk attitudes has been neglected in the network formation literature. We propose a dynamic network formation model that builds on standard microeconomic concepts of utility maximization, incomplete information, and risk aversion. With our model, we discover a new mechanism that generates a correlation between network position and payoffs of individuals. Second, we show how the generated network architecture depends on the uncertainty in the environment it is embedded in.
|Date of creation:||Jan 2012|
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|Publication status:||Published by Ivie|
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