Knife-Edge or Plateau: When Do Market Models Tip?

Drew Fudenberg and Glenn Ellison ()

Scholarly Articles from Harvard University Department of Economics

Abstract: This paper studies whether agents must agglomerate at a single location in a class of models of two-sided interaction. In these models there is an increasing returns effect that favors agglomeration, but also a crowding or market-impact effect that makes agents prefer to be in a market with fewer agents of their own type. We show that such models do not tip in the way the term is commonly used. Instead, they have a broad plateau of equilibria with two active markets, and tipping occurs only when one market is below a critical size threshold. Our assumptions are fairly weak, and are satisfied in Krugman's model of labor market pooling, a heterogeneous-agent version of Pagano's asset market model, and Ellison, Fudenberg, and Möbius' model of competing auctions.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (111)

Published in Quarterly Journal of Economics

Downloads: (external link)
http://dash.harvard.edu/bitstream/handle/1/3160493/fudenberg_knife-edge.pdf (application/pdf)

Related works:
Journal Article: Knife-Edge or Plateau: When Do Market Models Tip? (2003)
Working Paper: Knife-Edge or Plateau: When do Market Models Tip? (2003)
Working Paper: Knife Edge of Plateau: When Do Market Models Tip? (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3160493

Access Statistics for this paper

More papers in Scholarly Articles from Harvard University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Office for Scholarly Communication ().