Financial Market Ethics
We develop a model of psychological-games-played-on-a-network to demonstrate a role for endogenously-determined, rationally chosen ethics. Our analysis produces sharp results about contagion of non-ethical or ethical behavior and the possible equilibrium configurations of each type of behavior. We find, and quantify, critical densities for clusters of each type of behavior that determine everything about contagion. We introduce society as a third player to investigate ethical failures as externalities. We use these results to show how regulations and network structure can affect whether clusters of ethical behavior can survive and how large they can be in a financial market setting.