Investment decisions by firms can trigger economic crises, study finds.
The article discusses how decisions made by company managers can impact the economy. By studying a model of firms in different industries, researchers found that these decisions can lead to changes in prices, consumer wealth, and overall welfare. While most decisions improve efficiency and welfare, some can have negative effects on consumers. In certain situations, even small changes in firm distribution can cause economic crises with large price and demand fluctuations. However, in stable economies, small changes have minimal impact. The study uses numerical examples to illustrate these points.