Dynamic coordination among heterogeneous agents

Bernardo Guimaraes and Ana Elisa Gonçalves Pereira

No 380, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

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 there exists a set of beliefs that would make this coincidence possible – though they 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. The efficient solution would have agents following others even more often and giving less importance to the fundamental

Date: 2015-03-16
New Economics Papers: this item is included in nep-cdm, nep-gth and nep-mic
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Journal Article: Dynamic coordination among heterogeneous agents (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:eesptd:380

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