This paper introduces a novel form of moral hazard specific to networks and illustrates this concept using simple models from coordination games, epidemics, supply chains, and financial networks. In these models, agents form beneficial links that also propagate costly contagion. Endogenously,...

This paper develops a model to study the formation and regulation of information transmission networks. We analyze a cat and mouse game between a regulator, who sets and enforces a regulatory environment, and agents, who form networks to disseminate and share insider information. For any given...

This paper studies a model of firms with endogenous bilateral exposures and government bailouts. It is shown that the anticipation of bailouts makes firms less concerned with the counterparty choices of their counterparties. This “network hazard” gives rise to large central firms. Bailouts...

How do insiders respond to regulatory oversight? History suggests that they form sophisticated networks to share information and circumvent regulation. We develop a theory of the formation and regulation of information transmission networks. We show that agents with sufficiently complex networks...

How do insiders respond to regulatory oversight on transmissions? History suggests that they form more sophisticated networks to circumvent regulation. We develop a theory of the formation and regulation of transmission networks. We show that agents with sufficiently complex networks bypass any...

We study a model of network externalities transmitted over links wherein the externalities stem from links themselves rather than nodes. For example, bilateral investments can fail and trigger cascading defaults of firms. Joint research projects can succeed and innovations can be diffused over...

Governments use coercion to aggregate distributed information relevant to governmental objectives-from the prosecution of regime-stability threats to terrorism or epidemics. A cohesive social structure facilitates this task, as reliable information will often come from friends and acquaintances....