David Argente Publications

We study the relation between strategic complementarities and aggregate persistence in linear-quadratic mean field games with interactions in states and actions. The framework provides local approximations to common macroeconomic problems, including capital accumulation and multiproduct pricing. We show that the equilibrium aggregate dynamics coincide with those of a single-agent linear-quadratic control problem in which state and action curvatures are adjusted for strategic interactions. This result gives conditions for equilibrium existence, establishes uniqueness, and links strategic interactions to aggregate adjustment. We establish conditions under which stronger state complementarities increase persistence, while stronger action complementarities reduce it, even in multidimensional problems whose underlying matrices are not simultaneously diagonalizable. Under these conditions, internalizing state complementarities makes the utilitarian planner’s allocation more persistent, while internalizing action complementarities makes it less persistent. With common shocks, we give conditions under which individual and aggregate dynamics can be combined to identify strategic interactions and model parameters. Finally, we extend the analysis to interactions through higher moments of the state distribution.

Complementarities can have important welfare consequences, but quantifying these effects would seem to require identifying and valuing the underlying mechanisms separately. This paper shows that this need not be the case. I provide necessary and sufficient conditions under which baseline subsidized activity and the direct and total responses to a subsidy determine aggregate willingness to pay. A sufficient condition for valuing the equilibrium adjustment is that it has the same effect on utility as an additional subsidy common to all agents and relevant actions. The formula is easy to apply to existing estimates and guides the design of new experiments.

This paper studies how new varieties enter markets and become locally available. We provide causal evidence of demand externalities that operate in two steps. First, information about new varieties diffuses directly through real-world social ties among consumers. Second, early purchases generate an indirect spillover to firms: local retailers learn from 'pioneer' consumers which new varieties are most likely to succeed and adjust their product offerings accordingly. We study this process in the context of direct-to-consumer imports. Using customs records on individuals' purchases matched to population-wide social networks, international migrant links, and retailer catchment areas, we document economically meaningful demand externalities. Product-specific demand shocks abroad transmit through migrant networks and shift which varieties consumers purchase. Leveraging these shocks as a plausibly exogenous source of local demand variation, we show strong peer effects: prior purchases by close neighbors, coworkers, or friends increase an individual’s likelihood of purchasing the same variety, especially for premium and visible goods. We leverage this result to identify an indirect spillover from consumers to firms: retailers are more likely to add a variety when it becomes popular among consumers in their catchment area. Combining the instrument with linked consumer--retailer data and a self-conducted retailer survey, we show that this response reflects learning about latent demand for varieties not yet stocked locally. Together, social diffusion and retailer learning generate demand multipliers that reshape local product availability and expand access to global variety.

We document that sales of individual products decline steadily throughout most of the product life cycle. Products quickly become obsolete as they face competition from newer products sold by competing firms and the same firm. We build a dynamic model that highlights an innovation-obsolescence cycle, where firms need to introduce new products to grow; otherwise, their portfolios become obsolete as rivals introduce their own new products. By introducing new products, however, firms accelerate the decline of their own existing products, further depressing their sales. This mechanism has sizable implications for quantifying economic growth and the impact of innovation policies.