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Consistent Expectations Equilibria and Complex Dynamics in Renewable Resource Markets

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  • Cars H. Hommes

    (University of Amsterdam)

  • J. Barkley Rosser

    (Jr., James Madison University)

Abstract

Price fluctuations under adaptive learning in renewable resourcemarkets such as fisheries are examined. Optimal fisherymanagement with logistic fish pOpUlation growth implies a backward-bending, discounted supply curve for bioeconomicequilibrium sustained yield. Higher discount rates bend supplybackwards more to generate multiple steady state rationalexpectations equilibria. Under bounded rationality adaptive learningof a linear forecasting rule generates steady state, 2-cycle as weIl as chaotic consistent expectations equilibria (CEE),which are self-fulfilling in sample average andautocorrelations. The possibility of "learning to believe in chaos"is robust and even enhanced by dynamic noise.

Suggested Citation

  • Cars H. Hommes & J. Barkley Rosser, 2001. "Consistent Expectations Equilibria and Complex Dynamics in Renewable Resource Markets," Tinbergen Institute Discussion Papers 01-013/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20010013
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