IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Agglomeration under Forward-Looking Expectations: Potentials and Global Stability

  • Oyama, Daisuke

This paper considers a class of migration dynamics with forward-looking agents in a multi-country solvable variant of the core-periphery model of Krugman (Journal of Political Economy 99 (1991)). We find that, under a symmetric externality assumption, our static model admits a potential function, which allows us to identify a stationary state that is uniquely absorbing and globally accessible under the perfect foresight dynamics whenever the degree of friction in relocation decisions is sufficiently small. In particular, when trade barriers are low enough, full agglomeration in the country with the highest barrier is the unique stable state for small frictions. New aspects in trade and tax policy that arise due to forward-looking behavior are discussed.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15239.

in new window

Date of creation: 28 Mar 2006
Date of revision:
Handle: RePEc:pra:mprapa:15239
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Gianmarco Ottaviano, 1996. "Monopolistic Competition, Trade and Endogenous Spatial Fluctuations," Working Papers 240, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Fudenberg, Drew & Diamond, Peter, 1989. "Rational Expectations Business Cycles in Search Equilibrium," Scholarly Articles 3374509, Harvard University Department of Economics.
  3. Josef Hofbauer & Daisuke Oyama & Satoru Takahashi, 2004. "Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics," Econometric Society 2004 North American Winter Meetings 339, Econometric Society.
  4. Karl H. Schlag, 1995. "Why Imitate, and if so, How? A Bounded Rational Approach to Multi-Armed Bandits," Discussion Paper Serie B 361, University of Bonn, Germany, revised Mar 1996.
  5. Borck, Rainald & Pfluger, Michael, 2006. "Agglomeration and tax competition," European Economic Review, Elsevier, vol. 50(3), pages 647-668, April.
  6. Spulber,Daniel F., 2007. "Global Competitive Strategy," Cambridge Books, Cambridge University Press, number 9780521880817.
  7. Karl-Göran Mäler & Anastasios Xepapadeas & Aart de Zeeuw, 2003. "The Economics of Shallow Lakes," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(4), pages 603-624, December.
  8. J. Swinkels, 2010. "Adjustment Dynamics and Rational Play in Games," Levine's Working Paper Archive 456, David K. Levine.
  9. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  10. Hopkins, Ed, 1999. "Learning, Matching, and Aggregation," Games and Economic Behavior, Elsevier, vol. 26(1), pages 79-110, January.
  11. Pfluger, Michael, 2004. "A simple, analytically solvable, Chamberlinian agglomeration model," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 565-573, September.
  12. 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.
  13. Akihiko Matsui & Kiminori Matsuyama, 1991. "An Approach to Equilibrium Selection," Discussion Papers 1065, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Berliant, Marcus & Kung, Fan-chin, 2009. "Bifurcations in regional migration dynamics," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 714-720, November.
  15. Sandholm, William H., 2009. "Large population potential games," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1710-1725, July.
  16. Kyoji Fukao & Roland Benabou, 1993. "History Versus Expectations: A Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 535-542.
  17. Josef HOFBAUER & Gerhard SORGER, 1998. "Perfect Foresight and Equilibrium Selection in Symmetric Potential Games," Vienna Economics Papers vie9802, University of Vienna, Department of Economics.
  18. Monderer, Dov & Shapley, Lloyd S., 1996. "Potential Games," Games and Economic Behavior, Elsevier, vol. 14(1), pages 124-143, May.
  19. Martin, Philippe & Rogers, Carol Ann, 1994. "Trade Effects of Regional Aid," CEPR Discussion Papers 910, C.E.P.R. Discussion Papers.
  20. Angelo Antoci & Antonio Gay & Massimiliano Landi & Pier Luigi Sacco, 2007. "Global Analysis of an Expectations Augmented Evolutionary Dynamics," Working Papers 25-2007, Singapore Management University, School of Economics.
  21. Hofbauer, Josef & Sandholm, William H., 2009. "Stable games and their dynamics," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1665-1693.e, July.
  22. Kaneda, Mitsuhiro, 2003. "Policy designs in a dynamic model of infant industry protection," Journal of Development Economics, Elsevier, vol. 72(1), pages 91-115, October.
  23. Philippe Jehiel & Moritz Meyer-ter-Vehn & Benny Moldovanu, 2008. "Ex-post implementation and preference aggregation via potentials," Economic Theory, Springer, vol. 37(3), pages 469-490, December.
  24. Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2007. "Changes in transport and non-transport costs: Local vs global impacts in a spatial network," Regional Science and Urban Economics, Elsevier, vol. 37(6), pages 625-648, November.
  25. Slade, Margaret E, 1994. "What Does an Oligopoly Maximize?," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 45-61, March.
  26. Oyama, Daisuke, 2009. "History versus expectations in economic geography reconsidered," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 394-408, February.
  27. Nobuhiro Kiyotaki & Randall Wright, 1989. "A contribution to the pure theory of money," Staff Report 123, Federal Reserve Bank of Minneapolis.
  28. Tabuchi, Takatoshi & Thisse, Jacques-François & Zeng, Dao-Zhi, 2002. "On the Number and Size of Cities," CEPR Discussion Papers 3386, C.E.P.R. Discussion Papers.
  29. Fernando Vega Redondo, 1993. "Shaping Long-Run Expectations In Problems Of Coordination," Working Papers. Serie AD 1993-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  30. Kiminori Matsuyama, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 617-650.
  31. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  32. Takatoshi Tabuchi & Jacques-François Thisse & Dao-Zhi Zeng, 2005. "On the number and size of cities*," Journal of Economic Geography, Oxford University Press, vol. 5(4), pages 423-448, August.
  33. Mai, Chao-Cheng & Peng, Shin-Kun & Tabuchi, Takatoshi, 2008. "Economic geography with tariff competition," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 478-486, September.
  34. Behrens, Kristian & Thisse, Jacques-Francois, 2007. "Regional economics: A new economic geography perspective," Regional Science and Urban Economics, Elsevier, vol. 37(4), pages 457-465, July.
  35. repec:oup:restud:v:59:y:1992:i:2:p:375-88 is not listed on IDEAS
  36. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  37. Jianjun Miao, 2003. "Optimal Capital Structure and Industry Dynamics," Industrial Organization 0310001, EconWPA.
  38. Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-91, October.
  39. I. Gilboa & A. Matsui, 2010. "Social Stability and Equilibrium," Levine's Working Paper Archive 534, David K. Levine.
  40. Ui, Takashi, 2001. "Robust Equilibria of Potential Games," Econometrica, Econometric Society, vol. 69(5), pages 1373-80, September.
  41. Daisuke Oyama & Olivier Tercieux, 2009. "Iterated potential and robustness of equilibria," Post-Print halshs-00754349, HAL.
  42. Matsui, Akihiko, 1992. "Best response dynamics and socially stable strategies," Journal of Economic Theory, Elsevier, vol. 57(2), pages 343-362, August.
  43. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 651-667.
  44. Frédéric Robert-Nicoud, 2005. "The structure of simple 'New Economic Geography' models (or, On identical twins)," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 201-234, April.
  45. Sandholm, William H., 2001. "Potential Games with Continuous Player Sets," Journal of Economic Theory, Elsevier, vol. 97(1), pages 81-108, March.
  46. Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December.
  47. L. Blume, 2010. "The Statistical Mechanics of Strategic Interaction," Levine's Working Paper Archive 488, David K. Levine.
  48. Sandholm, William H., 2007. "Pigouvian pricing and stochastic evolutionary implementation," Journal of Economic Theory, Elsevier, vol. 132(1), pages 367-382, January.
  49. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  50. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 21-49, February.
  51. William H. Sandholm, 2002. "Evolutionary Implementation and Congestion Pricing," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 667-689.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:15239. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.