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Ruling out multiplicity and indeterminacy: The role of heterogeneity

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorHerrendorf, Berthold
dc.contributor.authorValentinyi, Ákos
dc.contributor.authorWaldman, Robert
dc.contributor.editorUniversidad Carlos III de Madrid. Departamento de Economía
dc.date.accessioned2009-12-18T11:44:26Z
dc.date.available2009-12-18T11:44:26Z
dc.date.issued1999-06
dc.description.abstractIt is well known that economies of scale that are external to the individual decision makers can lead to self-fulfilling prophecies and the multiplicity or even indeterminacy of equilibrium. We argue that the importance of this source of multiplicity and indeterminacy is overstated in representative agent models, as they ignore the potential stabilizing effect of heterogeneity. We illustrate this point in a version of Matsuyama' s (1991) two-sector model with increasing returns to scale. Two main results are shown. First, sufficient homogeneity with respect to individual productivity leads to the instability and non-uniqueness of a given stationary state and the indeterminacy of equilibrium at that stationary state. Second, sufficient heterogeneity leads to the global saddle-path stability and the uniqueness of a given stationary state and the global uniqueness of equilibrium.
dc.format.mimetypeapplication/pdf
dc.identifier.issn2340-5031
dc.identifier.urihttps://hdl.handle.net/10016/6167
dc.language.isoeng
dc.relation.ispartofseriesUC3M Working papers. Economics
dc.relation.ispartofseries99-71-27
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRightsopen access
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.ecienciaEconomía
dc.subject.otherHeterogeneity
dc.subject.otherincreasing returns to scale
dc.subject.otherindeterminacy
dc.subject.otherstability
dc.subject.otheruniqueness
dc.titleRuling out multiplicity and indeterminacy: The role of heterogeneity
dc.typeworking paper*
dspace.entity.typePublication
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