Several of my recent papers defend the controversial idea that self-fulfilling prophecies should be taken seriously as a source of economic fluctuations. Antonio Ciccone and I argue in On Payoff Heterogeneity in Games with Strategic Complementarities that heterogeneity does not rule out multiplicity except under extreme parameterizations, contrary to the claims of Herrendorf et. al. (REStud 2000).
In A Herding Perspective on Global Games and Multiplicity I point out that the "global games" critique of multiplicity relies crucially the assumption of exactly simultaneous moves. If instead most players observe just a few previous actions, then the game has a "herding" structure, and multiple outcomes are possible. Frank Heinemann, Peter Ockenfels, and I demonstrate this multiplicity in the laboratory in Multiple Outcomes of Speculative Behavior in Theory and in the Laboratory.
Multiple Outcomes of Speculative Behavior in Theory and
in the Laboratory.
Joint with
Frank Heinemann
(U. Munich)
and Peter Ockenfels (U. Frankfurt). Nov. 2004,
revised Apr. 2005.
A Herding Perspective on Global Games and Multiplicity.
U. Carlos III Economics Working Paper 03-29 (08), May 2003;
revised July 2006.
On Payoff Heterogeneity in Games with Strategic Complementarities.
Joint with Antonio Ciccone (U. Pompeu Fabra). Oxford Economic Papers, 56 (4), Oct. 2004, pp. 701-34.
Computing Business Cycles with Endogenous Risk.
Joint with Michael Reiter (U. Pompeu Fabra). March 2001.
A Simple Model of Multiple Equilibria Based on Risk.
U. Pompeu Fabra Economics Working Paper #407, July 1999;
revised Oct. 2000.