KNOWLEDGE CREATION AS A SQUARE DANCE ON THE HILBERT CUBE*

Authors

  • Marcus Berliant,

    1. Washington University in St. Louis, U.S.A.; Konan University, Japan
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  • Masahisa Fujita

    1. Washington University in St. Louis, U.S.A.; Konan University, Japan
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    • 1

      The first author is grateful for funding from the Kyoto Institute of Economic Research at Kyoto University, from Washington University in St. Louis, and from the American Philosophical Society. The second author is grateful for Grants Aid for Scientific Research Grants S 13851002 and A 18203016 from the Japanese Ministry of Education and Science. We thank two anonymous referees, Alex Anas, Bob Hunt, Katsuhito Iwai, Felix Kubler, Fan-chin Kung, Charles Leung, David Levine, Koji Nishikimi, Joseph Perktold, Richard Rogerson, Tony Smith, and Takatoshi Tabuchi for helpful comments. We thank Y. Nakamura for technical typing assistance and for creating the electronic versions of the figures. Evidently, the authors alone are responsible for any remaining errors and for the views expressed herein. Please address correspondence to: Marcus Berliant, Department of Economics, Washington University, Campus Box 1208, One Brookings Drive, St. Louis, MO 63130-4899, U.S.A. Phone: (314) 935-8486. Fax: (314) 935-4156. E-mail: berliant@artsci.wustl.edu.


  • *

    Manuscript received June 2006; revised March 2007 and September 2007.

Abstract

This article presents a micromodel of knowledge creation through the interactions among a group of people. The model features myopic agents in a pure externality model of interaction. Surprisingly, for a large set of initial conditions we find that the equilibrium process of knowledge creation converges to the most productive state, where the population splits into smaller groups of optimal size; close interaction takes place within each group only. This optimal size is larger as heterogeneity of knowledge is more important in the knowledge production process. Equilibrium paths are found analytically; they are a discontinuous function of initial heterogeneity.

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