Rational expectations (may) lead to complex dynamics in a Muthian cobweb model with heterogeneous agents

Ahmad Naimzada and Marina Pireddu

Journal of Economic Behavior & Organization, 2020, vol. 177, issue C, 415-432

Abstract: Starting from a Muthian cobweb model, we extend the profit-based evolutionary setting in Hommes and Wagener (2010) by assuming that, in addition to pessimistic, optimistic and unbiased fundamentalists, the market is populated by rational producers, which correctly anticipate the next period price. Thanks to their introduction, we find that, differently from the framework in Hommes and Wagener (2010), the map governing the dynamics is no more monotonically decreasing. Hence, if on the one hand adding rational agents enlarges the local stability region of the steady state, on the other hand their consideration opens the door to complex dynamic outcomes, characterized by chaotic attractors and rich multistability phenomena, that we investigate along the paper.

Keywords: Muthian cobweb model; Evolutionary learning; Heterogeneous agents; Rational expectations; Complex dynamics (search for similar items in EconPapers)
JEL-codes: B52 C62 D83 D84 D91 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:177:y:2020:i:c:p:415-432

DOI: 10.1016/j.jebo.2020.06.024

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