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Imitation in heterogeneous populations

Author

Listed:
  • Jonas Hedlund

    (University of Heidelberg)

  • Carlos Oyarzun

    (University of Queensland)

Abstract

We study a boundedly rational model of imitation when payoff distributions of actions differ across types of individuals. Individuals observe others’ actions and payoffs, and a comparison signal. One of two inefficiencies always arises: (i) uniform adoption, i.e., all individuals choose the action that is optimal for one type but suboptimal for the other, or (ii) dual incomplete learning, i.e., only a fraction of each type chooses its optimal action. Which one occurs depends on the composition of the populations and how critical the choice is for different types of individuals. In an application, we show that a monopolist serving a populations of boundedly rational consumers cannot fully extract the surplus of high-valuation consumers, but can sell to consumers who do not value the good.

Suggested Citation

  • Jonas Hedlund & Carlos Oyarzun, 2018. "Imitation in heterogeneous populations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(4), pages 937-973, June.
    • Handle: RePEc:spr:joecth:v:65:y:2018:i:4:d:10.1007_s00199-017-1044-1
    DOI: 10.1007/s00199-017-1044-1
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    Cited by:

    1. Jonas Hedlund, 2015. "Imitation in Cournot oligopolies with multiple markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(3), pages 567-587, November.

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    More about this item

    Keywords

    Imitation; Heterogeneous populations; Bounded rationality; Fubini extension;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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