A behavioral cobweb model with heterogeneous speculators

Cristian Wieland and Frank Westerhoff

No 171, Computing in Economics and Finance 2004 from Society for Computational Economics

Abstract: This paper aims at integrating heterogeneous boundedly rational speculators into the classical cobweb framework in which the producers have naive expectations. The net supply available to consumers thus depends on the positions of the speculators who switch between technical and fundamental forecast rules to predict prices. Our nonlinear, yet quite simple model has the potential to produce price dynamics which mimics the well-known cyclical price fluctuations of commodity markets. We show that if the number of speculators increases we first observe a pitchfork bifurcation and then a period doubling bifurcation. After infinitely many period doubling bifurcations the dynamics becomes chaotic

Keywords: cobweb theory; heterogeneous speculators; price dynamics; commodity markets; bifurcation (search for similar items in EconPapers)
JEL-codes: D84 E30 Q11 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-evo
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Citations: View citations in EconPapers (1)

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