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The dynamics of social interaction with agents’ heterogeneity

  • Emilio Barucci


    (Department of Mathematics, Politecnico di Milano)

  • Marco Tolotti


    (Department of Applied Mathematics, University of Venice)

We analyze a class of binary dynamic models inspired by [4] on agents’ choices and social interaction. The main feature of our analysis is that agents are heterogeneous, in particular their attitude to interact with the choices of the other agents changes over time endogenously. Although dynamic approaches to the study of models with heterogeneous agents have been already applied in different fields, to our knowledge a complete study of an endogenously varying population of agents has not yet been pursued. As observed in [3], the main problem is given by the fact that with heterogeneous agents the system may be non reversible. We address these problems, we describe the (possible multiple) steady states of the processes involved, we analyze local and global stability and we discuss the similarities and the differences with respect to the literature. Applications are also provided.

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Paper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 189.

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Length: 28 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:vnm:wpaper:189
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  1. repec:tpr:qjecon:v:103:y:1988:i:3:p:441-63 is not listed on IDEAS
  2. Brock, William A & Durlauf, Steven N, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 235-60, April.
  3. Edward L. Glaeser & Bruce I. Sacerdote & Jose A. Scheinkman, 2002. "The Social Multiplier," NBER Working Papers 9153, National Bureau of Economic Research, Inc.
  4. Chang, Sheng-Kai, 2007. "A simple asset pricing model with social interactions and heterogeneous beliefs," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1300-1325, April.
  5. Allison, G. & Fudenberg, D., 1992. "Rules of Thumb for Social Learning," Working papers 92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Follmer, Hans & Horst, Ulrich & Kirman, Alan, 2005. "Equilibria in financial markets with heterogeneous agents: a probabilistic perspective," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 123-155, February.
  7. Bischi, Gian-Italo & Gallegati, Mauro & Gardini, Laura & Leombruni, Roberto & Palestrini, Antonio, 2006. "Herd Behavior And Nonfundamental Asset Price Fluctuations In Financial Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 10(04), pages 502-528, September.
  8. Giesecke, Kay & Weber, Stefan, 2004. "Cyclical correlations, credit contagion, and portfolio losses," Journal of Banking & Finance, Elsevier, vol. 28(12), pages 3009-3036, December.
  9. Edward E. Glaeser & Bruce Sacerdote & Jose A. Scheinkman, 1995. "Crime and Social Interactions," Harvard Institute of Economic Research Working Papers 1738, Harvard - Institute of Economic Research.
  10. Edward L. Glaeser & Jose A. Scheinkman, 2001. "Non-Market Interactions," Harvard Institute of Economic Research Working Papers 1914, Harvard - Institute of Economic Research.
  11. Sah, R.K., 1990. "Social Osmosis And Patterns Of Crime: A Dynamic Economic Analysis," Papers 609, Yale - Economic Growth Center.
  12. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
  13. repec:att:wimass:9707 is not listed on IDEAS
  14. William A. Brock & Steven N. Durlauf, 1997. "A Formal Model of Theory Choice in Science," Research in Economics 97-04-031e, Santa Fe Institute.
  15. Paolo Dai Pra & Wolfgang J. Runggaldier & Elena Sartori & Marco Tolotti, 2007. "Large portfolio losses: A dynamic contagion model," Papers 0704.1348,, revised Mar 2009.
  16. Edward L. Glaeser & Jose A. Scheinkman, 1999. "Measuring Social Interactions," Harvard Institute of Economic Research Working Papers 1878, Harvard - Institute of Economic Research.
  17. Blume,L. & Durlauf,S., 2002. "Equilibrium concepts for social interaction models," Working papers 7, Wisconsin Madison - Social Systems.
  18. Rüdiger Frey & Jochen Backhaus, 2008. "Pricing And Hedging Of Portfolio Credit Derivatives With Interacting Default Intensities," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(06), pages 611-634.
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