Electronic Financial Networks With Socially Responsible Investing
Abstract: Advances in telecommunication networks, and, in particular, the Internet, have transformed the economic landscape for financial decision-making. Meanwhile the past and current financial crisis calls for social responsibility which is considered by many stack-holders as a potential solution to avoid future crisis. In this paper, we develop a framework for the modeling, analysis, and computation of solutions to multitiered financial network problems with electronic transactions and socially responsible investment in which both the sources of financial funds as well as the intermediaries are multi-criteria decision-makers. We assume that these decision-makers seek not only to maximize their net revenues but also minimize risk with the risk being penalized by a variable weight. Furthermore, we assume that the intermediaries are socially responsible companies, which want to maximize their social responsibility. We make explicit the behavior of the various decision-makers, including the consumers at the demand markets for the financial products. We derive the optimality conditions, and demonstrate that the governing equilibrium conditions of the financial network economy can be formulated as a finite-dimensional variational inequality problem. Qualitative properties of the equilibrium financial flow and price pattern are also provided
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Authors: Ke Ke, Kun Liao, Qiang Qiang
