Modeling strategies to protect investors from financial fraud collapses on social networks

Abstract

Financial fraud is more likely to spread and produce serious and adverse results through social networks. This study investigates four protection strategies: the uniform protection strategy, the random protection strategy, the targeted protection strategy, and the acquaintance protection strategy based on the potential-investor-divestor (PID) model. The simulation results show that the targeted protection strategy is the best solution for both ER and BA networks. The random protection strategy is the least efficient solution, as it requires spreading a large number of anti-fraud messages to achieve a relatively good performance. The acquaintance protection strategy performs closely to the targeted protection strategy in terms of social dynamics. However, the uniform protection strategy is better than the acquaintance protection strategy, as it involves fewer victims when it collapses. This study suggests that the regulators should protect investors from financial fraud collapses by promoting the financial literacy education and regulating the behaviors of influential people.