Big push - BigpushMultipleEquilibria

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Big push – Multiple Equilibria Equilibrium 1 and 3 cut the 45 degree line (the "line of harmony" where individual investment = average  investment level) from above. In these cases, the level of individual investment is higher than the expected  investment/average investment level of everyone else, and it indicates a stable push to points development  levels   d1   and   d3,   as   people   are   spending   more   than   average. Equilibrium 2 is UNstable because you cut from below the 45 degree line, indicating that individual  investment   is   lower   than   the   expected/average   before   reaching   D2. I don't know if this is totally correct game theory wise, but as for the reason the investment level would go  back to d1, I'm imagining a scenario where your class was studying for a supposedly difficult exam.  However, one person finds out that in order to get an A, you only need to get 4/10 questions right. This 
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This note was uploaded on 10/09/2010 for the course ECON 313 taught by Professor Iforget during the Fall '10 term at McGill.

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