Threshold behavior and aggregate fluctuation

• 成果类型: Article
• 署名作者: Nirei, M
• 署名单位: Utah System of Higher Education; Utah State University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2004.08.006
• 发表日期: 2006
• 页码: 309-322
• 关键词: aggregation; propagation; cascade; law of large numbers; heavy-tailed distribution; (S; s) policy; lumpy investment; menu cost; strategic complementarity; best response dynamics

摘要

This paper concerns a propagation mechanism in an economy where many individuals follow a threshold rule and interact with a positive feedback. We derive an asymptotic distribution of the propagation size when the number of the agents tends to infinity. The propagation distribution exhibits a slower convergence to a deterministic value than it would if the agents followed a smooth adjustment policy. This gives rise to significant aggregate fluctuations in a finite lumpy-adjusting economy even when the agents are hit by small independent shocks. (c) 2004 Elsevier Inc. All rights reserved.