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Equilibria in Models of Binary Choice with Heterogeneous Agents and Social Influence

Author

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  • Phan, Denis

    (Université Paris 4)

  • Semeshenko, Viktoriya

    (Univeristy of Grenoble)

Abstract

In this paper we explore the impact of social influence on the equilibria in the simplest model with binary choices. We investigate the interplay between social influence and individual decision to adopt with global interactions, both analytically in the case of an infinite number and numerically in the case of a finite number of agents. We derive exactly necessary and sufficient conditions for the existence of single or multiple equilibria as a function of the strength of social influence. In particular, this model encompasses the classical downward sloping demand curve as a particular case. The paper also provides a brief introduction to avalanches and hysteresis loops, and includes extensive bibliographical references.

Suggested Citation

  • Phan, Denis & Semeshenko, Viktoriya, 2008. "Equilibria in Models of Binary Choice with Heterogeneous Agents and Social Influence," European Journal of Economic and Social Systems, Lavoisier, vol. 21(1), pages 7-37.
    • Handle: RePEc:ris:ejessy:0073
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    Keywords

    Binary Choice; Complex Systems; Heterogeneous Interacting Agents; Neighbourhood Effects; Social Influence;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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