Paper #546

Títol:

On payoff heterogeneity in games with strategic complementarities

Autors:

Antonio Ciccone i James Costain

Data:

Abril 2001

Resum:

Payoff heterogeneity weakens positive feedback in binary choice models in two ways. First, heterogeneity drives individuals to corners where they are unaffected by strategic complementarities. Second, aggregate behaviour is smoother than individual behaviour when individuals are heterogeneous. However, this smoothing does not necessarily eliminate positive feedback or guarantee a unique equilibrium. In games with an unbounded, continuous choice space, heterogeneity may either weaken or strengthen positive feedback, depending on a simple convexity/concavity condition. We conclude that positive feedback phenomena derived in representative agent models will often be robust to heterogeneity.

Paraules clau:

Heterogeneity, multiplicity, discrete choice, strategic complementarity, positive feedback

Codis JEL:

C72, E00

Àrea de Recerca:

Microeconomia

Publicat a:

Oxford Economic Papers, 56 (4), 701-713, 2004

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