Path Dependence

Definition: Following David (97): Path dependence describes allocative stochastic processes. Refers to the way the history of the process relates to the limiting distribution of the process.

"Processes that are non-ergodic, and thus unable to shake free of their history, are said to yield path dependent outcomes." (p. 13)

"A path-dependent stochastic process is one whose asymptotic distribution evolves as a consequence" of the history of the process. (p. 14)

The term is relevant to the outcome of economic processes through history. For example, the QWERTY keyboard standard would not be the standard if it had not been chosen early; thus the keyboard standard evolved through a path-dependent process.

(Econterms)

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