Exit from Lock-in and Market Information

Elettra Agliardi
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Elettra Agliardi: University of Bologna

Chapter 4 in Positive Feedback Economies, 1998, pp 67-89 from Palgrave Macmillan

Abstract: Abstract Path-dependent dynamic systems with self-reinforcing mechanisms often have a multiplicity of possible asymptotic states. The initial state and early random events push the dynamics into the domain of one of these asymptotic states and thus select the structure that the system eventually locks into. This issue has been tackled in several economic examples, by Arthur, David and others, dealing with sequential choices between competing technologies when increasing returns to adoption are present. These models have shown that such systems display the properties of multiple equilibria, possible inefficiency, lock-in, path-dependence and symmetry-breaking which we introduced in Chapter 1, section 1.2. A question arising in this context is the following: if an economic system is locked-in to an inferior local equilibrium, is ‘escape’ into a superior one possible? Do we need policies for the economic system, or will spontaneous actions at a local level suffice?

Keywords: Stable Equilibrium; Positive Feedback Economy; Transition Intensity; Network Externality; Multiple Equilibrium (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37621-2_5

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DOI: 10.1057/9780230376212_5

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