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Heterogeneous Expectations, Dynamics, and Stability of Markets


  • Lasselle, Laurence

    (University of St Andrews)

  • Serge Svizzero
  • Clem Tisdell


This paper examines the role of heterogeneous beliefs in a cobweb model. We proceed in two stages. First, two groups of agents are distinguished. They are either fundamentalists, or chartists. The latter specify the expected price from an adaptive process, the former have a "rational behaviour". Second, agents may choose between rational expectations and an adaptive process. We demonstrate twofold. The market behaviour of fundamentalists compared to chartists promotes market stability. Market stability may emerge depending on the specification of the expectations and the intensity of switching between the two behaviours.

Suggested Citation

  • Lasselle, Laurence & Serge Svizzero & Clem Tisdell, 2003. "Heterogeneous Expectations, Dynamics, and Stability of Markets," Royal Economic Society Annual Conference 2003 130, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:130

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    References listed on IDEAS

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    Cited by:

    1. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186 Elsevier.
    2. Brandouy, O., 2005. "Stock markets as Minority Games: cognitive heterogeneity and equilibrium emergence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 349(1), pages 302-328.

    More about this item


    cobweb model; switching behaviour; Flip bifurcation; Neimark-Sacker bifurcation; resonance;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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