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Fragile, Error-Prone And Idiosyncratic Behaviour: Informational Cascades
Inhaltsangabe:Abstract: Macroeconomics deals with the behaviour of the economy altogether and concentrates on fundamental and actual economic problems. Microeconomics deals with the behaviour of individuals and the aggregation of their actions in different institutional frameworks. Thus, both micro- and macroeconomics are doctrines to describe and understand individuals behaviour, activities and outcomes. So, why does one try to better understand? Individuals are curious , is a popular explanation. Another is that understanding may lead to a better outcome for individuals. There exist a lot of patterns of behaviour. One behaviour pattern is the so-called uniform behaviour. Imitation and mimi...
Information Cascades; Entry Written for the New Palgrave Dictionary of Economics
An information cascade occurs when it is optimal for an individual, having observed the actions and possibly payoffs of those ahead of him, to take the same action regardless of his own information. When there are informational cascades, society may reap only a modest fraction of the potential gains from aggregating the diverse information of many individuals. As a result, information cascades can help explain some otherwise puzzling aspects of human and animal behavior. For example, why do individuals tend to converge on similar behavior? Why is mass behavior prone to error and fads? We suggest that the theory of observational learning, and particularly of information cascades, has much to offer economics and other social sciences.Abstract describes an entry written for: S. N. Durlauf and L. E. Blume, The New Palgrave Dictionary of Economics, forthcoming, Palgrave Macmillan. This abstract has not been reviewed or edited. The definitive published version of the entry may be found in the complete New Palgrave Dictionary of Economics in print and online, forthcoming.
Cascades in Networks and Aggregate Volatility
Abstract: We provide a general framework for the study of cascade effects created by interconnections between sectors, firms or financial institutions. Focusing on a multi sector economy linked through a supply network, we show how structural properties of the supply network determine both whether aggregate volatility disappears as the number of sectors increases (i.e., whether the law of large numbers holds) and when it does, the rate at which this happens. Our main results characterize the relationship between first order interconnections (captured by the weighted degree sequence in the graph induced by the input-output relations) and aggregate volatility, and more importantly, the relatio...
The Global Business Revolution and the Cascade Effect
Using empirical data from the supply chain of aerospace, beverages and retail this text develops an original framework, the 'cascade effect', to explain changes in industrial concentration. This provides an original insight into the determinants of industrial structure and has vital implications for firms and policy-makers in developing countries.
Information Cascades
Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments with student subjects. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled environment. As a baseline, we compare their behavior to student choices in similar treatments. We further examine whether, and to what extent, cascade formation is influenced by both private signal strength and the quality of previous public signals, as well as decision heuristics that differ from Bayesian rationality. Analysis of over 1,500 individual decisions suggests that CBOT professionals are better able to discern the quality of public signals than their student counterparts. This leads to much different cascade formation. Further, while the behavior of students is consistent with the notion that losses loom larger than gains, market professionals are unaffected by the domain of earnings. These results are important in both a positive and normative sense.
Selected Works of Joseph E. Stiglitz
This is the third volume in a new, definitive, six-volume edition of the works of Joseph Stiglitz, one of today's most distinguished and controversial economists. Stiglitz was awarded the Nobel Prize in Economics in 2001 for his work on asymmetric information and is widely acknowledged as one of the pioneers in the field of modern information economics and more generally for his contributions to microeconomics. Volume III contains a selection of Joseph E. Stiglitz's work on microeconomics. It questions well-established tenets, including many that are so fundamental they are almost taken for granted, covering basic concepts of risk and markets; the management of risk; the theory of the firm; the economics of organization; and theory of human behaviour. Stiglitz reflects on his work and the field more generally throughout the volume by including substantial original introductions to the Selected Works, the volume as a whole, and each part within the volume.
The Oxford Handbook of Computational Economics and Finance
The Oxford Handbook of Computational Economics and Finance provides a survey of both the foundations of and recent advances in the frontiers of analysis and action. It is both historically and interdisciplinarily rich and also tightly connected to the rise of digital society. It begins with the conventional view of computational economics, including recent algorithmic development in computing rational expectations, volatility, and general equilibrium. It then moves from traditional computing in economics and finance to recent developments in natural computing, including applications of nature-inspired intelligence, genetic programming, swarm intelligence, and fuzzy logic. Also examined are r...
Manifesto of the New Economy
The book describes the main directions for the development of the digital society. The author angles its book to those who are interested to know what would replace search engines, and how social networks would evolve; what profit can be made of different forms of informational collaboration (crowdsourcing, collaborative filtering). And, the main thing, how it will influence the structure of the society and human pursuit for happiness. The author does not confine himself to a theory, he sets and solves practical questions: How talent, success and “stardom” are interconnected, how to make money in social networks, what is the business model for the development of entertainment and media, how to measure cultural values, and what is the subjective time of the individual and how to make it qualitative? There have been no answers to these questions before. Internet and social networks have provided tools and data that Alexander Dolgin was the first to use in economics.
Cascades and Fluctuations in an Economy with an Endogenous Production Network
This paper proposes a simple theory of production in which the network of input-output linkages is endogenously determined by the firms' decisions to operate. Since producers benefit from having multiple suppliers, the economy features complementarities between the operating decisions of nearby firms. As a result, tightly connected clusters of producers emerge around productive firms. In addition, after a firm is hit by a severe shock, a cascade of shutdowns might spread from neighbor to neighbor as the network reorganizes itself. While well-connected firms are better able to withstand shocks, they trigger larger cascades upon shut down. The theory also predicts how the shape of the network ...
Wealth of Persons
Thomas Piketty's Capital in the Twenty-First Century initiated a great debate not just about inequality but also regarding the failures found in the economic models used by theoreticians and practitioners alike. Wealth of Persons offers a totally different perspective that challenges the very terms of the debate. The Great Recession reveals a great existential rift at the core of certain economic reflections, thereby showing the real crisis of the crisis of economics. In the human sciences we have created a kind of "Tower of Babel" where we cannot understand each other any longer. The "breakdowns" occur equally on the personal, social, political, and economic levels. There is a need for an "...
