Equilibria in models of binary choice with heterogeneous agents and social influence

PHAN DENIS; SEMESHENKO VIKTORIYA

EUROPEAN JOURNAL OF ECONOMIC AND SOCIAL SYSTEMS

Hermes-Lavoisier

Lugar: CACHAN cedes, France; Año: 2008 vol. 21 p. 7 - 37

1292-8895

In this paper we explore the impact of social influence on the equilibria in the simplest model with binary choices. We investigate the interplay between the social influence and individual decision to adopt with global interactions, both analytically in the case of an infinite number and numerically in the case of a finite number of agents. We derive exactly necessary and sufficient conditions for existence of single or multiple equilibria as a function of the strength of social influence. In particular, this model encompasses the classical downward sloping demand curve as a particular case. The paper also provides a brief introduction to avalanches and hysteresis loops, and includes extensive bibliographical references.