Abstract
This paper considers social interactions and investigates how far the properties of moderate social influence and of diminishing returns foster the uniqueness and stability of a dynamic competitive economy. In particular, in contrast to the static framework, it is shown that moderate social influence can neither ensure unique long run outcomes nor rule out other kinds of complexities such as indeterminacy; also, the assumption of diminishing returns for the aggregate economy does not eliminate any of these complexities. Instead, the (derived) property of moderate dynamic social influence, which accounts explicitly for intertemporal spillovers, provides the proper criterion for the (saddlepoint) stable evolution of a competitive economy.
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Communicated by G. Feichtinger.
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Wirl, F. Social Interactions within a Dynamic Competitive Economy. J Optim Theory Appl 133, 385–400 (2007). https://doi.org/10.1007/s10957-007-9207-z
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DOI: https://doi.org/10.1007/s10957-007-9207-z