PPT Slide
- Heterogeneous population of agents
- Agent utility is increasing in income (derived from working) and leisure (not working)
- Agents supply varying amounts of effort, ei(t)
- There exist increasing returns in firm output:
- Compensation scheme: nondecreasing in ei(t)
- Each time period an agent is selected at random and computes its optimal effort level, e*, for:
- staying a member of its present firm;
- moving to a ‘neighboring’ firm;
- starting a new firm;
- The option that yields the greatest utility is selected