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This model generalizes the Bell’s ``Locally interdependent preferences in a general equilibrium environment’’ (JEBO, 2002). It models the interaction between a market, endogenous preferences, and a social network.
The agents consume two kinds of goods (e.g. black and white t-shirts) which are comparable, i.e. their total consumption has a natural meaning (how many t-shirts an agent consumes). In every period, all agents get an initial endowment of each good. Then they trade these goods with each other at the centralized market at the market clearing price. The agents’ preferences evolve over the time: each agent increases her preference for the good that has been recently more popular (i.e. more consumed) in her neighborhood. Her neighborhood consists of the agent herself and the agents she has relationship with. The set of all relationships in the population forms a social network.
You can either set parameters yourself, or use prearranged scenarios. Then pres SETUP button and then GO button. Observe.
Notice there are four possible outcomes of the simulations:
There might or might not be clusters of the agents with the same preferences in equilibrium.
While the market negative feedback mechanism forces the relative price to unity, the bandwagon positive feedback increases the demand for the abundant good, increasing its relative price, and possibly making the agents only to consume the abundant good and throw the other good away.
Try prearranged scenarios. They cover some of the possible interesting results.
I’m sorry I won’t suggest anything. I’ve got some ideas but I’d like to save them for a future paper. ;-)
The model uses links.
The model is based on Bell’s model, see below.