Stability and Cycles in a Cobweb Model with Heterogeneous Expectations
We investigate the dynamics of a cobweb model with heterogeneous beliefs, generalizing the example of Brock and Hommes (1997). We examine situations where the agents form expectations by using either rational expectations, or a type of adaptive expectations with limited memory defined from the last two prices. We specify conditions that generate cycles. These conditions depend on a set of factors that includes the intensity of switching between beliefs and the adaption parameter. We show that both Flip bifurcation and Neimark-Sacker bifurcation can occur as primary bifurcation when the steady state is unstable.
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- Hommes, Cars H., 1998. "On the consistency of backward-looking expectations: The case of the cobweb," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 333-362, January.
- William A. Brock & Cars H. Hommes, 1995.
"Rational Routes to Randomness,"
95-03-029, Santa Fe Institute.
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- Reiner Franke & Tim Nesemann, 1999. "Two destabilizing strategies may be jointly stabilizing," Journal of Economics, Springer, vol. 69(1), pages 1-18, February.
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- Hommes, C.H., 1999. "Cobweb Dynamics under Bounded Rationality," CeNDEF Working Papers 99-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Woodford, Michael, 2000. "An Interview With William A. Brock," Macroeconomic Dynamics, Cambridge University Press, vol. 4(01), pages 108-138, March.
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"A Rational Route to Randomness,"
9530r, Wisconsin Madison - Social Systems.
- repec:cup:macdyn:v:4:y:2000:i:1:p:108-38 is not listed on IDEAS
- C. Chiarella & X-Z. He, 2001.
"Asset price and wealth dynamics under heterogeneous expectations,"
Taylor & Francis Journals, vol. 1(5), pages 509-526.
- Carl Chiarella & Xue-Zhong He, 2001. "Asset Price and Wealth Dynamics Under Heterogeneous Expectations," Research Paper Series 56, Quantitative Finance Research Centre, University of Technology, Sydney.
- Xue-Zhong (Tony) He & Carl Chiarella, 2001. "Asset Price and Wealth Dynamics under Heterogeneous Expectations," CeNDEF Workshop Papers, January 2001 5A.2, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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