A behavioral cobweb-like commodity market model with heterogeneous speculators

Frank Westerhoff and Cristian Wieland

Economic Modelling, 2010, vol. 27, issue 5, 1136-1143

Abstract: According to empirical studies, speculators place significant orders in commodity markets and may cause bubbles and crashes. This paper develops a cobweb-like commodity market model that takes into account the behavior of technical and fundamental speculators. We show that interactions between consumers, producers and heterogeneous speculators may produce price dynamics which mimics the cyclical price motion of actual commodity markets, i.e., irregular switches between bullish and bearish price developments. Moreover, we find that the impact of speculators on price dynamics is non-trivial: depending on the market structure, speculative transactions may either be beneficial or harmful for market stability.

Keywords: Commodity; markets; Cobweb; models; Heterogeneous; speculators; Bifurcation; analysis (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:27:y:2010:i:5:p:1136-1143

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