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Stability And Cycles In A Cobweb Model With Heterogeneous Expectations

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Author Info
LASSELLE, LAURENCE
SVIZZERO, SERGE
TISDELL, CLEM

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Abstract

We investigate the dynamics of a cobweb model with heterogeneous beliefs, generalizing the example of Brock and Hommes (1997). We examine situations where the agents form expectations by using either rational expectations, or a type of adaptive expectations with limited memory defined from the last two prices. We specify conditions that generate cycles. These conditions depend on a set of factors that includes the intensity of switching between beliefs and the adaption parameter. We show that both Flip bifurcation and Neimark Sacker bifurcation can occur as primary bifurcation when the steady state is unstable.

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Publisher Info
Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 9 (2005)
Issue (Month): 05 (November)
Pages: 630-650
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Handle: RePEc:cup:macdyn:v:9:y:2005:i:05:p:630-650_05

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Carl Chiarella & Xue-Zhong He, 2001. "Asset Price and Wealth Dynamics Under Heterogeneous Expectations," Research Paper Series 56, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
    Other versions:
  2. William A. Brock & Cars H. Hommes, 1997. "A Rational Route to Randomness," Econometrica, Econometric Society, vol. 65(5), pages 1059-1096, September.
  3. Lasselle, Laurence & Serge Svizzero & Clem Tisdell, 2003. "Heterogeneous Expectations, Dynamics, and Stability of Markets," Royal Economic Society Annual Conference 2003 130, Royal Economic Society. [Downloadable!]
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  4. repec:att:wimass:19956 is not listed on IDEAS
  5. Reiner Franke & Tim Nesemann, 1999. "Two destabilizing strategies may be jointly stabilizing," Journal of Economics, Springer, vol. 69(1), pages 1-18, February. [Downloadable!] (restricted)
  6. repec:cup:macdyn:v:4:y:2000:i:1:p:108-38 is not listed on IDEAS
  7. repec:att:wimass:199530 is not listed on IDEAS
  8. Woodford, Michael, 2000. "An Interview With William A. Brock," Macroeconomic Dynamics, Cambridge University Press, vol. 4(01), pages 108-138, March. [Downloadable!]
  9. Goeree, Jacob K. & Hommes, Cars H., 2000. "Heterogeneous beliefs and the non-linear cobweb model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 761-798, June. [Downloadable!] (restricted)
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  10. Branch, William A., 2002. "Local convergence properties of a cobweb model with rationally heterogeneous expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 63-85, November. [Downloadable!] (restricted)
  11. Hommes, Cars H., 1998. "On the consistency of backward-looking expectations: The case of the cobweb," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 333-362, January. [Downloadable!] (restricted)
  12. William A. Brock & Cars H. Hommes, 1995. "Rational Routes to Randomness," Working Papers 95-03-029, Santa Fe Institute.
  13. Hommes, C.H., 1999. "Cobweb Dynamics under Bounded Rationality," CeNDEF Working Papers 99-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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