Production delays, technology choice and cyclical cobweb dynamics

Roberto Dieci, Sarah Mignot and Frank Westerhoff

Chaos, Solitons & Fractals, 2022, vol. 156, issue C

Abstract: We develop a cobweb model in which firms, facing a two-period production delay, have access to a flexible (costly) and an inflexible (cheap) production technology. Moreover, firms select between production technologies depending on their evolutionary fitness, measured in terms of past realized profits. The dynamics of our cobweb model is driven by a four-dimensional nonlinear map. We analytically show that its unique steady state may become unstable due to a Neimark-Sacker bifurcation, a scenario that gives rise to cyclical price dynamics, as observed in actual commodity markets. Simulations furthermore reveal that our cobweb model may also produce chaotic motion.

Keywords: Cobweb models; Production technology; Cyclical price dynamics; Bounded rationality and learning; Stability and bifurcation analysis; Chaos (search for similar items in EconPapers)
JEL-codes: D24 E32 Q11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Production delays, technology choice and cyclical cobweb dynamics (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:156:y:2022:i:c:s0960077922000078

DOI: 10.1016/j.chaos.2022.111796

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