Fellowship, social network externalities, and management of religious risk

Abstract

Given the existence of religious risk, rational choice theory implies that – barring impediments – risk-averse religious actors will mitigate the effects of religious risk by constructing diversified religious portfolios and/or by purchasing relevant insurance. The absence of evidence that such portfolio diversification is a feature of monotheistic religions and the absence of markets for insuring against religious risk indicates that impediments abound. This paper proposes that social network externalities associated with religious fellowship mitigate religious risks faced by religious firms and their adherents and articulates a theory of firm location in fellowship space. The theory implies that religious firms’ locations in fellowship space are determined by the quantity and type of religious risks firms and their adherents face; by their degree of aversion to these risks; by members’ perception of the feasibility of mitigating religious risk via diversification and/or purchasing insurance; and by the market opportunity costs of fellowship activities relative to the market opportunity costs of private religious activities.