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Collective Behavior with Endogenous Thresholds

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  • Xue, J.
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    Abstract

    We endogenize the threshold points in Granovetter’s threshold model of collective behavior (Granovetter 1978). We do this in a simple model that combines strategic complementarity and private information in a dynamic setup with endogenous order of moves. Looking at Granovetter’s model in the strategic context allows us to highlight the sensitivity of collective outcomes to the timing of the games and the reversibility of the actions, and to emphasize an extra incentive for people to follow other people: to encourage more people to follow them.

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    File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0613.pdf
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    Bibliographic Info

    Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0613.

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    Length: 37
    Date of creation: Feb 2006
    Date of revision:
    Handle: RePEc:cam:camdae:0613

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    Web page: http://www.econ.cam.ac.uk/index.htm

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    Keywords: Endogenous timing; irreversibility; threshold;

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    1. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    2. Stephen Morris & Hyun Song Shin, 2003. "Heterogeneity and Uniqueness in Interaction Games," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1402, Cowles Foundation for Research in Economics, Yale University.
    3. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    4. Carlsson, H. & Van Dame, E., 1991. "Equilibrium Selection in Stag Hunt Games," Papers, Tilburg - Center for Economic Research 9170, Tilburg - Center for Economic Research.
    5. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, Econometric Society, vol. 62(5), pages 1065-85, September.
    6. Van Damme, E., 1991. "Equilibrium Selection in 2 x 2 Games," Papers, Tilburg - Center for Economic Research 9108, Tilburg - Center for Economic Research.
    7. Balinga, Sandeep & Sjostrom, Tomas, 2001. "Arms Races and Negotiations," Working Papers, Pennsylvania State University, Department of Economics 3-01-2, Pennsylvania State University, Department of Economics.
    8. Stephen Morris & Hyun Song Shin, 2000. "Rethinking Multiple Equilibria in Macroeconomic Modelling," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1260, Cowles Foundation for Research in Economics, Yale University.
    9. Jianbo Zhang, 1997. "Strategic Delay and the Onset of Investment Cascades," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 188-205, Spring.
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