CE26 - Innovation, Travail

Managing Risk on Networks – MaRiNe

Submission summary

In a complex economic environment, managing risk is a key aspect of economic decisions, and it has a huge impact on economic development and inequalities. Risk management is mould by two main factors: the level of protection in case of bad shocks, and the available information about the economic environment. Social and economic networks play a prominent role in both dimensions. Indeed, networks are channels for risk sharing between households in developing economies or between financial institutions; also, networks are conduits for information transmission. Two recent major phenomena, the globalization of exchanges and the explosion of numerical technologies, create more interdependencies between economic agents, and thus reinforce network effects. How do these changes affect the impact of networks on the management of risk, on economic development and on inequalities?
This project aims at studying the impact of economic and social networks on risk management, economic development and inequalities. We will use theoretical, experimental and empirical investigations to study the impact of networks on risk management. In a first set of contributions, we will study networks as risk sharing devices. The increase of interdependencies between economic agents due to globalization makes this a current issue. We will explore the interplay between risk taking and risk sharing at both individual and firm level. At the individual level, we will analyze the tension between risk taking behaviors and optimal risk sharing rules on networks, and we will examine the relationship between risk taking and altruism in social networks. At the firm level, we will explore how risk taking affects systemic risk and contagion of default. Both financial and production sectors deserve interest, and we will treat them separately. In a second set of contributions, we will study networks as information sharing devices. This is a hot topic because the recent surge of numerical technologies in our modern societies modifies the information sets of agents as well as their perceptions about the network. We will investigate the diffusion of information in various contexts. We will study how the existence of economic opportunities can lead to strategic information transmission in networks. We will also examine the diffusion of opinions or beliefs, and we will track how agents can uncouple social influence from accurate information transmitted on networks. We will also investigate the individual perception of information in networks. Agents’ decisions being often shaped by social norms and perception biases, we will explore how networks affect these perception biases, and we will study how information on the network structure affects economic decisions.
This project relies extensively on the collaboration of different members of GREQAM and other universities, including Mediterranean universities and other prestigious ones such as Stanford, Kent, and universities affiliated to PSE. The team constituted for this project has a long experience in the economics of networks. This project would be an exceptional occasion to federate all these forces, both in France and in other countries.

Project coordination

Frédéric Deroïan (Aix-Marseille School of Economics)

The author of this summary is the project coordinator, who is responsible for the content of this summary. The ANR declines any responsibility as for its contents.

Partner

AMSE Aix-Marseille School of Economics
PSE ECOLE D´ ECONOMIE DE PARIS

Help of the ANR 321,779 euros
Beginning and duration of the scientific project: March 2019 - 36 Months

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