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Play-Hysteresis in Supply as Part of a Market Model

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  • Göcke, Matthias

Abstract

Consequences of path-dependent supply side hysteresis on the market equilibrium are illustrated. Supply is only a subsystem of the entire market with its forcing variable (price) being endogenous from the perspective of the entire market. This results in feedbacks on the equilibrium of price and quantity if transient exogenous disturbances occur. Aggregate hysteresis is modelled by continuous dynamics showing similarities to mechanical play . This contrast the standard firm level modelling of hysteresis resulting from discontinuous activity/inactivity switches. Non-linear play-dynamics are captured in a simple linearized way, just by adding two parameters to a supply equation.

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  • Göcke, Matthias, 2013. "Play-Hysteresis in Supply as Part of a Market Model," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79695, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79695
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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other

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