Social Interactions within a Dynamic Competitive Economy

Abstract This paper considers social interactions and investigates how far the properties of moderate social influence and of diminishing returns foster the uniqueness and stability of a dynamic competitive economy. In particular, in contrast to the static framework, it is shown that moderate social influence can neither ensure unique long run outcomes nor rule out other kinds of complexities such as indeterminacy; also, the assumption of diminishing returns for the aggregate economy does not eliminate any of these complexities. Instead, the (derived) property of moderate dynamic social influence, which accounts explicitly for intertemporal spillovers, provides the proper criterion for the (saddlepoint) stable evolution of a competitive economy.

[1]  X. Vives.  Complementarities and Games: New Developments , 2004 .

[2]  George J. Mailath,et al.  The Social Context of Economic Decisions , 2002 .

[3]  P. Romer.  Increasing Returns and Long-Run Growth , 1986, Journal of Political Economy.

[4]  F. Hirsch.  The Social Limits to Growth , 1977 .

[5]  E. Glaeser,et al.  Advances in Economics and Econometrics: Nonmarket Interactions , 2003 .

[6]  Franz Wirl,et al.  History versus expectations: Increasing returns or social influence? , 2006 .

[7]  Franz Wirl.  Stability and limit cycles in competitive equilibria subject to adjustment costs and dynamic spillovers , 2002 .

[8]  Andrew John,et al.  Coordinating Coordination Failures in Keynesian Models , 1988 .

[9]  K. Nyborg,et al.  On social norms: the evolution of considerate smoking behavior , 2003 .

[10]  Paul Krugman,et al.  History versus Expectations , 1991 .

[11]  M. Altman.  The Economics of Profitable Inefficiency and Market Failure , 2020, Worker Satisfaction and Economic Performance.

[12]  Wolfgang Pesendorfer,et al.  Design Innovation and Fashion Cycles , 1995 .

[13]  G. Feichtinger,et al.  Multiple Equilibria and Thresholds Due to Relative Investment Costs , 2004 .

[14]  Luigi Montrucchio,et al.  Dynamical Systems that Solve Continuous-Time Concave Optimization Problems: , 2021, Cycles and Chaos in Economic Equilibrium.

[15]  A. Rustichini,et al.  Introduction to the Symposium on Growth, Fluctuations, and Sunspots: Confronting the Data , 1994 .

[16]  P. DeMarzo,et al.  Persuasion Bias, Social Influence, and Uni-Dimensional Opinions , 2001 .

[17]  F. Wirl,et al.  Wealth Induced Multiple Equilibria in Small Open Economy Versions of the Ramsey Model , 2008 .

[18]  Bruce Sacerdote,et al.  The Social Multiplier , 2002 .

[19]  Michael Lynn,et al.  The norm of restaurant tipping , 2003 .