Autore
Valentinyi, Akos

Titolo
Rules of thumb and local interaction
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1995 - Fascicolo: 29 - Pagina iniziale: 2 - Pagina finale: 48

This paper studies an econom y where boundedly rational agents choose one of two technologies. Agents ask some of their neighbors about their experiences and, in addition, may receive an exogenous signal. Using this information, they apply an exogenous rule of thumb to determine the better option. The non-trivial behavior of the econom y is generated by the explicitly modeled neighborhood relation. Considering various rules of thumb, the paper shows that it is not true that agents will infer the better technology almost surely. If they receive an exogenous signal in addition to communicating with some neighbors, the signal determines the steady state of the economy. In contrast, if there is no exogenous signal, it is shown that the econom y has two stationary states: the better technology may die out or it may drive out the worse one. The latter result is in sharp contrast to previous articles where almost sure convergence to the better technology can be ensured by certain conditions.



Testo completo: http://hdl.handle.net/1814/554

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