A behavioral cobweb model with heterogeneous speculators
AbstractThis paper aims at integrating heterogeneous boundedly rational speculators into the classical cobweb framework in which the producers have naive expectations. The net supply available to consumers thus depends on the positions of the speculators who switch between technical and fundamental forecast rules to predict prices. Our nonlinear, yet quite simple model has the potential to produce price dynamics which mimics the well-known cyclical price fluctuations of commodity markets. We show that if the number of speculators increases we first observe a pitchfork bifurcation and then a period doubling bifurcation. After infinitely many period doubling bifurcations the dynamics becomes chaotic
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 171.
Date of creation: 11 Aug 2004
Date of revision:
cobweb theory; heterogeneous speculators; price dynamics; commodity markets; bifurcation;
Find related papers by JEL classification:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
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