Abstract
A unique dataset from a large Ponzi scheme shows that investment ideas can spread epidemically through social contagion. Investors could join the scheme only by personal invitation from an existing member, and I can observe how the idea spreads from one person to the next based on the inviter-invitee relationships. The social network has so-called scale-free connectivity structure where the distribution of the number of invited people approximately follows a power law. The structure differs significantly from randomly formed networks and explains why word-of-mouth information can spread rapidly even if the average investor does not share it with many others.
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