Stability and cycles in a cobweb model with heterogeneous expectations

Laurence Lasselle; Serge Svizzero; Clement Allan Tisdell

Stability and cycles in a cobweb model with heterogeneous expectations

Laurence Lasselle ¹ Serge Svizzero ² Clement Allan Tisdell

2 CEMOI - Centre d'Économie et de Management de l'Océan Indien

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.

Keywords : Bounded rationality Cobweb model Flip bifurcation Neimark-Sacker bifurcation

Document type :

Journal articles

Domain :

Humanities and Social Sciences / Economies and finances

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http://hal.univ-reunion.fr/hal-02155092
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Submitted on : Thursday, June 13, 2019 - 12:58:47 PM
Last modification on : Saturday, June 15, 2019 - 1:28:08 AM

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Stability and cycles in a cobweb model with heterogeneous expectations

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