Dynamic coordination among heterogeneous agents

Bernardo Guimaraes, Ana Elisa Pereira

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

. We study a dynamic model of coordination with timing frictions and payoff heterogeneity. There is a unique equilibrium, characterized by thresholds that determine the choices of each type of agent. We characterize equilibrium for the limiting cases of vanishing timing frictions and vanishing shocks to fundamentals. A lot of conformity emerges: despite payoff heterogeneity, agents’ equilibrium thresholds partially coincide as long as a set of beliefs that would make this coincidence possible exists. However, the equilibrium thresholds never fully coincide. In case of vanishing frictions, the economy behaves almost as if all agents were equal to an average type. Conformity is not inefficient. In the efficient solution, agents follow others even more often.
Original languageAmerican English
Pages (from-to)13-33
Number of pages21
JournalJournal of Mathematical Economics
Volume73
DOIs
StatePublished - 1 Dec 2017

Keywords

  • Attention friction
  • Conformity
  • Dynamic games
  • Timing friction

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