Heterogeneous Expectations, Dynamics, and Stability of Markets
AbstractThis paper examines the role of heterogeneous beliefs in a cobweb model. We proceed in two stages. First, two groups of agents are distinguished. They are either fundamentalists, or chartists. The latter specify the expected price from an adaptive process, the former have a "rational behaviour". Second, agents may choose between rational expectations and an adaptive process. We demonstrate twofold. The market behaviour of fundamentalists compared to chartists promotes market stability. Market stability may emerge depending on the specification of the expectations and the intensity of switching between the two behaviours.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 130.
Date of creation: 04 Jun 2003
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cobweb model; switching behaviour; Flip bifurcation; Neimark-Sacker bifurcation; resonance;
Other versions of this item:
- Laurence Lasselle & Serge Svizzero & Clem Tisdell, 2003. "Heterogeneous Expectations, Dynamics and Stability of Markets," Discussion Paper Series, Department of Economics 200308, Department of Economics, University of St. Andrews.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-16 (All new papers)
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