Financial linkages smooth the shocks faced by individual components of the system, but they also create a wedge between ownership and decision-making. The classical intuition on the role of pooling risk in raising welfare is valid when ownership is evenly dispersed. However, when the ownership...

This chapter shows that networks can have large and differentiated effects on behavior and then argues that social and economic pressures facilitate the formation of heterogeneous networks. Thus networks can play an important role in understanding the wide diversity in human behavior and in...

We choose between alternatives without being fully informed about the rewards from different courses of action. In making our decisions, we use our own past experience and the experience of others. So the ways in which we interact - our social network - can influence our choices. These choices...

In this paper we test the celebrated quot;Strength of weak tiesquot; theory of Granovetter (1973). We test two hypotheses on the network structure in a data set of collaborating economists. While we find support for the hypothesis of transitivity of strong ties, we reject the hypothesis that...