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Production delays, technology choice and cyclical cobweb dynamics

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  • Dieci, Roberto
  • Mignot, Sarah
  • Westerhoff, Frank

Abstract

We develop a cobweb model in which firms, facing a two-period production delay, have access to a flexible (costly) and an inflexible (cheap) production technology. Moreover, firms select between production technologies depending on their evolutionary fitness, measured in terms of past realized profits. The dynamics of our cobweb model is driven by a four-dimensional nonlinear map. We analytically show that its unique steady state may become unstable due to a Neimark-Sacker bifurcation, a scenario that gives rise to cyclical price dynamics, as observed in actual commodity markets. Simulations furthermore reveal that our cobweb model may also produce chaotic motion.

Suggested Citation

  • Dieci, Roberto & Mignot, Sarah & Westerhoff, Frank, 2022. "Production delays, technology choice and cyclical cobweb dynamics," Chaos, Solitons & Fractals, Elsevier, vol. 156(C).
    • Handle: RePEc:eee:chsofr:v:156:y:2022:i:c:s0960077922000078
    DOI: 10.1016/j.chaos.2022.111796
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    Cited by:

    1. Dieci, Roberto & Mignot, Sarah & Schmitt, Noemi & Westerhoff, Frank H., 2022. "Production delays, supply distortions and endogenous price dynamics," BERG Working Paper Series 182, Bamberg University, Bamberg Economic Research Group.
    2. Savin, Ivan & Mundt, Philipp, 2022. "Drivers of productivity change in global value chains: Reallocation vs. innovation," Economics Letters, Elsevier, vol. 220(C).
    3. Daske, Thomas & March, Christoph, 2024. "Efficient incentives with social preferences," Theoretical Economics, Econometric Society, vol. 19(3), July.
    4. Sarah Mignot & Fabio Tramontana & Frank Westerhoff, 2024. "Complex dynamics in a nonlinear duopoly model with heuristic expectation formation and learning behavior," Annals of Operations Research, Springer, vol. 337(3), pages 809-834, June.
    5. Sahm, Marco, 2022. "Optimal accuracy of unbiased Tullock contests with two heterogeneous players," BERG Working Paper Series 175, Bamberg University, Bamberg Economic Research Group.
    6. Schmitt, Sefanie Y. & Bruckner, Dominik, 2022. "Unaware consumers and disclosure of deficiencies," BERG Working Paper Series 178, Bamberg University, Bamberg Economic Research Group.

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    More about this item

    Keywords

    Cobweb models; Production technology; Cyclical price dynamics; Bounded rationality and learning; Stability and bifurcation analysis; Chaos;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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