It is customary to focus on the network of interdependencies between firms to understand how and whether a shock to one firm will propagate to others. This paper argues that agency conflicts at the firm-level and not just the network structure, play a crucial role in amplifying or muting the...

Under full substitutability of preferences, it is known that a competitive equilibrium exists in trading networks, and is equivalent to (chain) stable outcomes. In this paper, we formulate the problem of finding an efficient outcome as a generalized submodular flow problem on a suitable network....

This paper introduces a model of endogenous network formation and systemic risk. In it, agents form networks that efficiently trade-off the possibility of systemic risk with the benefits of trade. Second, fundamentally ‘safer' economies generate higher interconnectedness, which in turn leads...