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Social interaction and conformism in a random utility model

  • Barucci, Emilio
  • Tolotti, Marco

We analyze a class of dynamic binary choice models with social interaction. Agents are heterogeneous and their degree of conformism (taste externality) changes over time endogenously. We show that social interaction in itself is not enough to observe multiple equilibria and that the equilibrium outcome is not necessarily a polarized society. The social outcome depends on the law of motion that drives the evolution of taste externality.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 12 ()
Pages: 1855-1866

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Handle: RePEc:eee:dyncon:v:36:y:2012:i:12:p:1855-1866
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