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Asymmetric information and macroeconomic dynamics

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  • Hawkins, Raymond J.
  • Aoki, Masanao
  • Roy Frieden, B.

Abstract

We show how macroeconomic dynamics can be derived from asymmetric information. As an illustration of the utility of this approach we derive the equilibrium density, non-equilibrium densities and the equation of motion for the response to a demand shock for productivity in a simple economy. Novel consequences of this approach include a natural incorporation of time dependence into macroeconomics and a common information-theoretic basis for economics and other fields seeking to link micro-dynamics and macro-observables.

Suggested Citation

  • Hawkins, Raymond J. & Aoki, Masanao & Roy Frieden, B., 2010. "Asymmetric information and macroeconomic dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(17), pages 3565-3571.
    • Handle: RePEc:eee:phsmap:v:389:y:2010:i:17:p:3565-3571
    DOI: 10.1016/j.physa.2010.04.032
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    References listed on IDEAS

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    Cited by:

    1. Stephan Leitner & Friederike Wall, 2021. "Decision-facilitating information in hidden-action setups: an agent-based approach," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(2), pages 323-358, April.
    2. Tilles, Paulo F.C. & Ferreira, Fernando F. & Francisco, Gerson & Pereira, Carlos de B. & Sarti, Flavia M., 2011. "A Markovian model market—Akerlof’s lemons and the asymmetry of information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(13), pages 2562-2570.
    3. Bagarello, F. & Haven, E., 2014. "The role of information in a two-traders market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 404(C), pages 224-233.
    4. Aoki, Masanao & Hawkins, Raymond J., 2010. "Non-self-averaging and the statistical mechanics of endogenous macroeconomic fluctuations," Economic Modelling, Elsevier, vol. 27(6), pages 1543-1546, November.
    5. Raymond J. Hawkins & B. Roy Frieden, 2012. "Asymmetric Information and Quantization in Financial Economics," International Journal of Mathematics and Mathematical Sciences, Hindawi, vol. 2012, pages 1-11, December.
    6. Leitner, Stephan & Wall, Friederike, 2022. "Micro-level dynamics in hidden action situations with limited information," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 372-393.
    7. Khrennikova, Polina, 2016. "Application of quantum master equation for long-term prognosis of asset-prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 450(C), pages 253-263.
    8. T. Krishna Kumar, 2023. "Professor C. R. Rao, the Founder President of the Indian Econometric Society is Awarded the International Prize in Statistics, 2023," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(3), pages 473-480, September.
    9. Patrick Reinwald & Stephan Leitner & Friederike Wall, 2021. "Limited intelligence and performance-based compensation: An agent-based model of the hidden action problem," Papers 2107.03764, arXiv.org.
    10. Khrennikova, Polina & Patra, Sudip, 2019. "Asset trading under non-classical ambiguity and heterogeneous beliefs," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 521(C), pages 562-577.

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