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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"Asset Price and Wealth Dynamics Under Heterogeneous Expectations,"
Research Paper Series
56, Quantitative Finance Research Centre, University of Technology, Sydney.
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- repec:cup:macdyn:v:4:y:2000:i:1:p:108-38 is not listed on IDEAS
- Reiner Franke & Tim Nesemann, 1999. "Two destabilizing strategies may be jointly stabilizing," Journal of Economics, Springer, vol. 69(1), pages 1-18, February.
- 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.
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"Rational Routes to Randomness,"
95-03-029, Santa Fe Institute.
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