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Adaptive Expectations and Dynamic Models for Network Goods

Author

Listed:
  • Arnut Paothong

    (Department of Mathematics and Statistics, University of South Florida, 4202 East Fowler Avenue, PHY 114, Tampa Florida, 33620-5700 USA)

  • G.S. Ladde

    (Department of Mathematics and Statistics, University of South Florida, 4202 East Fowler Avenue, PHY 114, Tampa Florida, 33620-5700 USA)

Abstract

In this work, we consider a utility function that is influenced by the value of network externality function at the consumer’s expected market size/share. Using this utility function, a market share adjustment function is introduced and is utilized to develop dynamic models of existing rational and static expectation processes. In addition, the role and scope of dynamic models of market share adjustment process are extended to the well-known adaptive expectation and its extension processes. The properties of equilibrium states of dynamic models are investigated which include location, stability, oscillation and the initial states in systematic and unified way. The most significant byproduct of presented results is that the properties of equilibrium states depend on the type of consumer expectation of a network good and the parameters of dynamic market share adjustment processes.

Suggested Citation

  • Arnut Paothong & G.S. Ladde, 2013. "Adaptive Expectations and Dynamic Models for Network Goods," Economic Analysis and Policy, Elsevier, vol. 43(3), pages 353-373, December.
    • Handle: RePEc:eee:ecanpo:v:43:y:2013:i:3:p:353-373
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    Citations

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    Cited by:

    1. Otunuga Olusegun M. & Ladde Gangaram S. & Ladde Nathan G., 2019. "Local Lagged Adapted Generalized Method of Moments: An Innovative Estimation and Forecasting Approach and its Applications," Journal of Time Series Econometrics, De Gruyter, vol. 11(1), pages 1-72, January.
    2. Arnut Paothong & G. Ladde, 2014. "Agent-based modeling simulation under local network externality," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 9(1), pages 1-26, April.

    More about this item

    Keywords

    Network externality; Adaptive expectation; Fixed point theorem; Stability;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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