Information Contagion in Climate-Stressed SME Networks: An Agent-Based Simulation Study

Đoàn Minh Lượng, Nguyen Tu Uyen, Duong Thi Phuong Thao, Duong Thu Ngan, Phong Ho, Nhung Duong, Tuan Do

Keywords: Agent-based modeling, Climate adaptation, Information asymmetry, Network contagion, SME resilience, Environmental accounting

Abstract: This paper investigates how heterogeneous adoption of environmental accounting standards generates information asymmetries that propagate through interconnected small and medium enterprise networks, creating emergent systemic vulnerabilities. We develop an agent-based model simulating hundreds of SMEs across multiple sectors, where firms adapt to climate stress based on differential access to environmental risk information. Our simulation framework captures the co-evolution of climate impacts, adaptation investments, and information diffusion through supply chain and credit network layers. Through extensive experiments, we identify a critical "valley of vulnerability" phenomenon where partial adoption of climate risk assessment tools temporarily increases systemic fragility before improving resilience. Spectral analysis reveals characteristic oscillation patterns in cascade dynamics that dampen with increased adoption. Robustness checks confirm this valley phenomenon emerges only when information signals are sufficiently precise to create behavioral divergence between informed and uninformed agents. Our findings challenge assumptions about gradual technology diffusion and provide quantitative insights for understanding information externalities in complex economic systems.

Area: Modelling and Simluation of Societies (SIM)

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Submission Number: 1313