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The dynamics of social interaction with agents’ heterogeneity

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Author Info
Emilio Barucci () (Department of Mathematics, Politecnico di Milano)
Marco Tolotti () (Department of Applied Mathematics, University of Venice)

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Abstract

We analyze a class of binary dynamic models inspired by [4] on agents’ choices and social interaction. The main feature of our analysis is that agents are heterogeneous, in particular their attitude to interact with the choices of the other agents changes over time endogenously. Although dynamic approaches to the study of models with heterogeneous agents have been already applied in different fields, to our knowledge a complete study of an endogenously varying population of agents has not yet been pursued. As observed in [3], the main problem is given by the fact that with heterogeneous agents the system may be non reversible. We address these problems, we describe the (possible multiple) steady states of the processes involved, we analyze local and global stability and we discuss the similarities and the differences with respect to the literature. Applications are also provided.

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File URL: http://www.dma.unive.it/wpdma/2009wp189.pdf
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File Function: First version, 2009
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Publisher Info
Paper provided by Department of Applied Mathematics, University of Venice in its series Working Papers with number 189.

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Length: 28 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:vnm:wpaper:189

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Related research
Keywords: heterogeneous agent models; intensity-based models; mean field interactions; random utilities; social interactions.;

Other versions of this item:

Find related papers by JEL classification:
D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium

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References listed on IDEAS
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  1. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August. [Downloadable!] (restricted)
  2. Bischi, Gian-Italo & Gallegati, Mauro & Gardini, Laura & Leombruni, Roberto & Palestrini, Antonio, 2006. "Herd Behavior And Nonfundamental Asset Price Fluctuations In Financial Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 10(04), pages 502-528, September. [Downloadable!]
  3. Edward L. Glaeser & Jose A. Scheinkman, 1999. "Measuring Social Interactions," Harvard Institute of Economic Research Working Papers 1878, Harvard - Institute of Economic Research.
  4. RãœDiger Frey & Jochen Backhaus, 2008. "Pricing And Hedging Of Portfolio Credit Derivatives With Interacting Default Intensities," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(06), pages 611-634. [Downloadable!] (restricted)
  5. Sah, Raaj K, 1991. "Social Osmosis and Patterns of Crime," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1272-95, December. [Downloadable!] (restricted)
  6. Chang, Sheng-Kai, 2007. "A simple asset pricing model with social interactions and heterogeneous beliefs," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1300-1325, April. [Downloadable!] (restricted)
  7. Brock, William A & Durlauf, Steven N, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Blackwell Publishing, vol. 68(2), pages 235-60, April.
  8. Follmer, Hans & Horst, Ulrich & Kirman, Alan, 2005. "Equilibria in financial markets with heterogeneous agents: a probabilistic perspective," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 123-155, February. [Downloadable!] (restricted)
  9. William A. Brock & Steven N. Durlauf, 1999. "A formal model of theory choice in science," Economic Theory, Springer, vol. 14(1), pages 113-130. [Downloadable!] (restricted)
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  10. Giesecke, Kay & Weber, Stefan, 2004. "Cyclical correlations, credit contagion, and portfolio losses," Journal of Banking & Finance, Elsevier, vol. 28(12), pages 3009-3036, December. [Downloadable!] (restricted)
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