Stability and cycles in a cobweb model with heterogeneous expectations

Abstract : 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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Laurence Lasselle, Serge Svizzero, Clement Allan Tisdell. Stability and cycles in a cobweb model with heterogeneous expectations. Macroeconomic Dynamics, Cambridge University Press (CUP), 2005, 9 (5), pp.630-650. ⟨10.1017/S1365100505050017⟩. ⟨hal-02155092⟩

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