Risk aversion and social networks

Marco van der Leij and Jaromír Kovářík

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: 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.

Keywords: Network formation; risk aversion; clustering coefficient; degree distribution (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-01
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Citations: View citations in EconPapers (1)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2012-01.pdf Fisrt version / Primera version, 2012 (application/pdf)

Related works:
Journal Article: Risk Aversion and Social Networks (2014)
Working Paper: Risk Aversion and Social Networks (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2012-01

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