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Consistent Expectations Equilibria And Complex Dynamics In Renewable Resource Markets

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  • Hommes, Cars H.
  • Rosser,, J. Barkley

Abstract

Price fluctuations under adaptive learning in renewable resourcemarkets such as fisheries are examined. Optimal fisherymanagement with logistic fish pOpUlation growth implies a backward-bending, discounted supply curve for bioeconomicequilibrium sustained yield. Higher discount rates bend supplybackwards more to generate multiple steady state rationalexpectations equilibria. Under bounded rationality adaptive learningof a linear forecasting rule generates steady state, 2-cycle as weIl as chaotic consistent expectations equilibria (CEE),which are self-fulfilling in sample average andautocorrelations. The possibility of "learning to believe in chaos"is robust and even enhanced by dynamic noise.
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  • Hommes, Cars H. & Rosser,, J. Barkley, 2001. "Consistent Expectations Equilibria And Complex Dynamics In Renewable Resource Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 5(02), pages 180-203, April.
  • Handle: RePEc:cup:macdyn:v:5:y:2001:i:02:p:180-203_01
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