Heterogeneous Beliefs and the Non-Linear Cobweb Model

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Heterogeneous Beliefs and the Non-Linear Cobweb Model

Author Info

Jacob K. Goeree () (University of Virginia)
Cars H. Hommes () (University of Amsterdam)

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Abstract

This paper investigates price fluctuations in an evolutionary cobweb model with heterogeneous beliefs. Agents choose between free naive expectations and costly rational expectations, and update their beliefs according to a "fitness" measure such as past realized net profits. For non-linear, monotonic demand and supply curves, it is shown that the evolutionary dynamics exhibits bifurcation routes to strange attractors when the intensity of choice to switch prediction strategies increases.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 97-115/1.

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Date of creation: 08 Nov 1997
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Handle: RePEc:dgr:uvatin:19970115

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Article
- 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)

Cited by:
(explanations, 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.)

Brock, W.A. & Dindo, P.D.E. & Hommes, C.H., 2005. "Adaptive Rational Equilibrium with Forward Looking Agents, fortcoming in International Journal of Economic Theory (IJET) 2006, special issue in honor of Jean-Michel Grandmont," CeNDEF Working Papers 05-15, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. [Downloadable!]
Hommes, C.H., 2007. "Bounded Rationality and Learning in Complex Markets," CeNDEF Working Papers 07-01, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. [Downloadable!]
Laurence Lasselle & Serge Svizzero & Clem Tisdell, 2007. " Stability and Cycles in a Cobweb Model with Heterogeneous Expectations," CDMA Working Paper Series 0706, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
Other versions:
- Laurence LASSELLE & Serge SVIZZERO & Clem TISDELL, 2004. "Stability and Cycles in a Cobweb Model with Heterogeneous Expectations," Economics Working Papers ECO2004/03, European University Institute. [Downloadable!]
- Lasselle, Laurence & Svizzero, Serge & Tisdell, Clem, 2005. "Stability And Cycles In A Cobweb Model With Heterogeneous Expectations," Macroeconomic Dynamics, Cambridge University Press, vol. 9(05), pages 630-650, November. [Downloadable!]
Xue-Zhong He & Frank H. Westerhoff, 2004. "Commodity Markets, Price Limiters and Speculative Price Dynamics," Research Paper Series 136, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
Other versions:
- He, Xue-Zhong & Westerhoff, Frank H., 2005. "Commodity markets, price limiters and speculative price dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1577-1596, September. [Downloadable!] (restricted)
Hommes, C.H.,, 2005. "Heterogeneous Agents Models: two simple examples, forthcoming In: Lines, M. (ed.) Nonlinear Dynamical Systems in Economics, CISM Courses and Lectures, Springer, 2005, pp.131-164," CeNDEF Working Papers 05-01, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. [Downloadable!]
Gomes, Orlando, 2007. "A two-dimensional non-equilibrium dynamic model," MPRA Paper 4817, University Library of Munich, Germany. [Downloadable!]
Other versions:
- Gomes, Orlando, 2009. "A two-dimensional non-equilibrium dynamic model," Structural Change and Economic Dynamics, Elsevier, vol. 20(3), pages 221-238, September. [Downloadable!] (restricted)
Gomes, Orlando, 2007. "Consumer confidence, endogenous growth and endogenous cycles," MPRA Paper 2883, University Library of Munich, Germany. [Downloadable!]

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