Production delays and price dynamics

Cars Hommes, Kai Li and Florian Wagener

Journal of Economic Behavior & Organization, 2022, vol. 194, issue C, 341-362

Abstract: This paper develops a unified analysis of the impacts of production delays on aggregate price fluctuations in a continuous-time cobweb-type model. We find that the time inconsistency between demand and supply due to production delays inherently generates an overshooting effect in prices. Large production delays give rise to price fluctuations, even with a low intensity of choice. We also provide results consistent with the rational route to randomness of Brock and Hommes (1997) in a continuous-time infinite-dimensional economy.

Keywords: Cobweb model; Heterogeneity; Adaptiveness; Production delay; Stability; Chaos (search for similar items in EconPapers)
JEL-codes: C62 D84 E32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:194:y:2022:i:c:p:341-362

DOI: 10.1016/j.jebo.2021.12.033

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