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Dynamic Complementarities, Efficiency and Nash Equilibria for Populations of Firms and Workers

  • Elvio Accinelli
  • Silvia London
  • Lionello F. Punzo
  • Edgar J. Sanchez Carrera

We consider an economy with two types of firms (innovative and non-innovative) and two types of workers (skilled and unskilled), where workers' decisions are driven by imitative behavior, and thus the evolution of such an economy depends on the initial distribution of the firms. We show that there exists a continuous of high level steady states and only one low level and asymptotically stable equilibrium. There exists a threshold value on the initial number of firms to be overcome it to located in the basin of attraction of one of the high level equilibrium. We show that in each high level equilibrium there coexists a share of innovative firms with a share of non-innovative firms, and a share of skilled workers (human capital) coexisting with a share of unskilled workers. But if the initial share of innovative firms is lower than the threshold value, then the economy evolves to a low level equilibrium wholly composed by non-innovative firms and unskilled workers. Finally, we characterise the equilibria as the evolutionarily stable strategies against a field.

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Article provided by Economics and Econometrics Society in its journal Journal of Economics and Econometrics.

Volume (Year): 53 (2010)
Issue (Month): 1 ()
Pages: 90-110

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Handle: RePEc:eei:journl:v:53:y:2010:i:1:p:90-110
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  1. Jose Apesteguia & Steffen Huck & Jörg Oechssler, 2003. "Imitation - Theory and Experimental Evidence," Bonn Econ Discussion Papers bgse20_2003, University of Bonn, Germany, revised Aug 2004.
  2. Sandler, Todd & Tschirhart, John, 1997. " Club Theory: Thirty Years Later," Public Choice, Springer, vol. 93(3-4), pages 335-55, December.
  3. Schlag, Karl H., 1994. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Discussion Paper Serie B 296, University of Bonn, Germany.
  4. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  5. Acemoglu, Daron, 1997. " Matching, Heterogeneity, and the Evolution of Income Distribution," Journal of Economic Growth, Springer, vol. 2(1), pages 61-92, March.
  6. Karl H. Schlag, . "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers 028, ESRC Centre on Economics Learning and Social Evolution.
  7. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 199-230, 04.
  8. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September.
  9. Schlag, Karl H., 1999. "Which one should I imitate?," Journal of Mathematical Economics, Elsevier, vol. 31(4), pages 493-522, May.
  10. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
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