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New: Epidemics of Rules, Information Aggregation Failure and Market Crashes

Sat, 25 Jun 2011 11:18:37 GMT

This short paper argues that rationally motivated coordination between agents is an important ingredient to understand the current economic crisis. We argue that changes in parameters that model the structure of a macro-economy or financial markets are not exogenous but arise as agents adopt rules that appear to be the norm around them. For example, if a rule is adopted by the majority of ones' neighbors it will become acceptable or, alternatively, if agents learn that changing their rule leads

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