A probabilistic framework for hysteresis

M. Grinfeld, Laura Piscitelli and Rod Cross

Physica A: Statistical Mechanics and its Applications, 2000, vol. 287, issue 3, 577-586

Abstract: We introduce a probabilistic framework for hysteresis, a ubiquitous phenomenon in economic situations involving sunk costs. The framework is applied to a simple model of a firm's market entry/exit decisions. We study the influence of sunk cost size, width of the hysteretic loop, and of availability of local information on wealth creation in a sector of the economy.

Keywords: Hysteresis; Discrete dynamical systems; Investment theory (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:287:y:2000:i:3:p:577-586

DOI: 10.1016/S0378-4371(00)00394-0

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