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Social Reinforcement: Cascades, Entrapment, and Tipping

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  • Geoffrey Heal
  • Howard Kunreuther

Abstract

The actions of different agents sometimes reinforce each other. Examples are network effects and the threshold models used by sociologists as well as (Harvey) Leibenstein's "bandwagon effects." We model such situations as a game with increasing differences, and show that tipping of equilibria, cascading, and clubs with entrapment are natural consequences of this mutual reinforcement. If there are several equilibria, one of which Pareto dominates, then the inefficient equilibria can be tipped to the efficient one, a result of interest in the context of coordination problems. We characterize the smallest tipping set. (JEL C72, D80, D85, Z13)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 2 (2010)
Issue (Month): 1 (February)
Pages: 86-99

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Handle: RePEc:aea:aejmic:v:2:y:2010:i:1:p:86-99

Note: DOI: 10.1257/mic.2.1.86
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  1. William Easterly, 2009. "Empirics of Strategic Interdependence: The Case of the Racial Tipping Point," NBER Working Papers 15069, National Bureau of Economic Research, Inc.
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  10. Crawford, Vincent P & Haller, Hans, 1990. "Learning How to Cooperate: Optimal Play in Repeated Coordination Games," Econometrica, Econometric Society, vol. 58(3), pages 571-95, May.
  11. Nicholas Economides, 1995. "The Economics of Networks," Working Papers 94-24, New York University, Leonard N. Stern School of Business, Department of Economics, revised Sep 1995.
  12. Kunreuther, Howard & Heal, Geoffrey, 2003. " Interdependent Security," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 231-49, March-May.
  13. H. Peyton Young, 1996. "The Economics of Convention," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 105-122, Spring.
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Cited by:
  1. Richter, Andries & van Soest, Daan & Grasman, Johan, 2013. "Contagious cooperation, temptation, and ecosystem collapse," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 141-158.
  2. Shafran, Aric P. & Lepore, Jason J., 2011. "Subsidization to induce tipping," Economics Letters, Elsevier, vol. 110(1), pages 32-35, January.
  3. Robert Hahn & Robert Ritz, 2014. "Optimal Altruism in Public Good Provision," Cambridge Working Papers in Economics 1403, Faculty of Economics, University of Cambridge.
  4. Heggedal, Tom-Reiel & Helland, Leif, 2014. "Platform selection in the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 168-177.

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