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Nonlinear delay monopoly with bounded rationality

Akio Matsumoto and Ferenc Szidarovszky

Chaos, Solitons & Fractals, 2012, vol. 45, issue 4, 507-519

Abstract: The purpose of this paper is to study the dynamics of a monopolistic firm in a continuous-time framework. The firm is assumed to be boundedly rational and to experience time delays in obtaining and implementing information on output. The dynamic adjustment process is based on the gradient of the expected profit. The paper is divided into three parts: we examine delay effects on dynamics caused by one-time delay and two-time delays in the first two parts. Global dynamics and analytical results on local dynamics are numerically confirmed in the third part. Four main results are demonstrated. First, the stability switch from stability to instability occurs only once in the case of a single delay. Second, the alternation of stability and instability can continue if two time delays are involved. Third, the occurence of Hopf bifurcation is analytically shown if stability is lost. Finally, in a bifurcation process, there are a period-doubling cascade to chaos and a period-halving cascade to the equilibrium point in the case of two time delays if the difference between the two delays is large.

Date: 2012
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:45:y:2012:i:4:p:507-519

DOI: 10.1016/j.chaos.2012.01.005

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