CONSISTENT EXPECTATIONS EQUILIBRIA AND COMPLEX DYNAMICS IN RENEWABLE RESOURCE MARKETS

Cars Hommes and J. Barkley Rosser

Macroeconomic Dynamics, 2001, vol. 5, issue 02, 180-203

Abstract: Price fluctuations under adaptive learning in renewable resource markets such as fisheries are examined. Optimal fishery management with logistic fish population growth implies a backward-bending, discounted supply curve for bioeconomic equilibrium sustained yield. Higher discount rates bend supply backward more to generate multiple steady-state rational expectations equilibria. Under bounded rationality, adaptive learning of a linear forecasting rule generates steady-state, two-cycle as well as chaotic consistent expectations equilibria, which are self-fulfilling in sample average and autocorrelations. The possibility of “learning to believe in chaos” is robust and even enhanced by dynamic noise.

Date: 2001
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Working Paper: Consistent Expectations Equilibria and Complex Dynamics in Renewable Resource Markets (2001)
Working Paper: Consistent Expectations Equilibria and Complex Dynamics in Renewable Resource Markets (2000)
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