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Cobweb theorems with production lags and price forecasting

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  • Dufrfesne, Daniel
  • Vázquez-Abad, Felisa

Abstract

The classical cobweb theorem is extended to include production lags and price forecasts. Price forecasting based on a longer period has a stabilizing effect on prices. Longer production lags do not necessarily lead to unstable prices; very long lags lead to cycles of constant amplitude. The classical cobweb requires elasticity of demand to be greater than that of supply; this is not necessarily the case in a more general setting. Random shocks are also considered.

Suggested Citation

  • Dufrfesne, Daniel & Vázquez-Abad, Felisa, 2013. "Cobweb theorems with production lags and price forecasting," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 7, pages 1-49.
  • Handle: RePEc:zbw:ifweej:201323
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2013-23
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    File URL: https://www.econstor.eu/bitstream/10419/74547/1/74733532X.pdf
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    References listed on IDEAS

    as
    1. Conlisk, John, 1974. "Stability in a Random Coefficient Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(2), pages 529-533, June.
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    More about this item

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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