Risk Aversion and Social Networks

Arbeitspapier

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. The model predicts that an agent's risk aversion is correlated with her network clustering coefficients, but not with her degree. We discover a mechanism that generates a correlation between network position and payoffs of individuals. Moreover, we show how the generated network architecture depends on the uncertainty in the environment it is embedded in.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 11-072/1

Classification and Topics

• Classification: Wirtschaft ; Network Formation and Analysis: Theory ; Criteria for Decision-Making under Risk and Uncertainty ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Subject: Network formation ; risk aversion ; clustering coefficient ; local/global search ; Risikoaversion ; Soziales Netzwerk ; Entscheidung bei Risiko ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kovarik, Jaromir ; van der Leij, Marco J.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/86781
• Last update: 10.03.2025, 11:42 AM CET