A cobweb model with local externalities
AbstractThis paper considers an extension of the standard cobweb model in a market with local externalities. In contrast with the standard cobweb model, firms must forecast both prices and local quantities; we develop new constructive stability and existence conditions for equilibria with positive outputs. We find evidence of clusters of firms whose output behavior is correlated as equilibrium is reached. We also show that an appropriately defined 'representative agent model' with a global externality exhibits the same mean or second-order properties of aggregate output as the more complex model with local externalities.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 32 (2008)
Issue (Month): 3 (March)
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