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Working papers

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Working papers


Expectation-driven asset price fluctuations under the spirit of capitalism hypothesis : The role of heterogeneity

Lise Clain-Chamosset-Yvrard, Working paper GATE 2018-03
In this paper, I study how heterogeneity amongst agents affects the occurrence of expectation-driven asset price fluctuations in a pure exchange economy à la Lucas, with infinitely-lived households, under the hypothesis of spirit of capitalism. I consider heterogeneous households in terms of preferences, endowments and initial wealth, and capture the spirit of capitalism through preferences for wealth. Preferences for wealth are the key element of this paper in a twofold aspect. First, they explain the occurrence of asset price fluctuations driven by self-fulfilling changes in expectations. Second, heterogeneity in endowments affects asset price level and dynamics only if preferences are heterogeneous. For instance, if agents with the strongest spirit of capitalism are also the rich in terms of endowments, heterogeneity in endowments heightens the asset price level in the long run, and destabilizes by enlarging the range of parameter values for which expectation-driven asset price fluctuations occur.

Does decentralization of decisions increase the stability of large groups ?

Tjaša Bjedov, Simon Lapointe, Thierry Madiès, Marie Claire Villeval, Working paper GATE 2018-02
Using a laboratory experiment with nested local and global public goods, we analyze the stability of global groups when individuals have the option to separate, according to the degree of decentralization of decision-making. We show that increasing the number of decisions made at the local level within a smaller group reduces the likelihood that individuals vote in favor of a break-up of the global group. Voting for a break-up of the global group is more likely when global group members are less cooperative and local group members are more cooperative. Reinforcing local group identity has no impact on votes.