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A general equilibrium evolutionary model with generic utility functions and generic bell-shaped attractiveness maps, generating fashion cycle dynamics

Author

Listed:
  • Ahmad, Naimzada
  • Marina, Pireddu

Abstract

We propose a discrete-time exchange economy evolutionary model, in which two groups of agents are possibly characterized by heterogeneous preference structures. With respect to the classical Walrasian framework, in our setting the definition of equilibrium, in addition to utility functions and endowments, depends also on population shares, which affect the market clearing conditions. We prove that, despite such difference with the standard framework, for every economy and for each population shares there exists at least one equilibrium and we show that, for all population shares, generically in the set of the economies, equilibria are finite and regular. We then introduce the dynamic law governing the evolution of the population shares, and we investigate the existence and the stability of the resulting stationary equilibria. More precisely, we assume that the reproduction level of a group is related to its attractiveness degree, which depends on the social visibility level, determined by the consumption choices of the agents in that group. The attractiveness of a group is described via a generic bell-shaped map, increasing for low visibility levels, but decreasing when the visibility of the group exceeds a given threshold value, due to a congestion effect. Thanks to the combined action of the price mechanism and of the share updating rule, the model may reproduce the recurrent dynamic behavior typical of the fashion cycle, presenting booms and busts in the agents’ consumption choices, and in the groups’ attractiveness and population shares. We illustrate the emergence of fashion cycle dynamics in the case of Stone-Geary utility functions, which generalize the Cobb-Douglas utility functions, and for different formulations of the attractiveness maps, already considered in the literature.

Suggested Citation

  • Ahmad, Naimzada & Marina, Pireddu, 2019. "A general equilibrium evolutionary model with generic utility functions and generic bell-shaped attractiveness maps, generating fashion cycle dynamics," Working Papers 401, University of Milano-Bicocca, Department of Economics, revised Mar 2019.
  • Handle: RePEc:mib:wpaper:401
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    File URL: http://repec.dems.unimib.it/repec/pdf/mibwpaper401.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ahmad, Naimzada & Marina, Pireddu, 2019. "The first fundamental theorem of welfare in a general equilibrium evolutionary setting," Working Papers 415, University of Milano-Bicocca, Department of Economics, revised 06 Jun 2019.

    More about this item

    Keywords

    general equilibrium; heterogeneous agents; evolution; bifurcation; fashion cycle.;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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