Social Reinforcement: Cascades, Entrapment and Tipping
AbstractThere are many social situations in which the actions of different agents reinforce each other. These include network effects and the threshold models used by sociologists (Granovetter, Watts) as well as Leibenstein's "bandwagon effects." We model such situations as a game with increasing differences, and show that tipping of equilibria as discussed by Schelling, cascading and Dixit's results on clubs with entrapment are natural consequences of this mutual reinforcement. If there are several equilibria, one of which Pareto dominates, then we show that the inefficient equilibria can be tipped to the efficient one, a result of interest in the context of coordination problems.
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Date of creation: Nov 2007
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Other versions of this item:
- Geoffrey Heal & Howard Kunreuther, 2010. "Social Reinforcement: Cascades, Entrapment, and Tipping," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 86-99, February.
- D20 - Microeconomics - - Production and Organizations - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- Q59 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-10 (All new papers)
- NEP-EVO-2007-11-10 (Evolutionary Economics)
- NEP-NET-2007-11-10 (Network Economics)
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