How to Control a Chaotic Economy?

Janusz A Holyst, Tilo Hagel, Gunter Haag and Wolfgang Weidlich

Journal of Evolutionary Economics, 1996, vol. 6, issue 1, 42 pages

Abstract: An economic system which exhibits chaotic behaviour has been stabilized on various periodic orbits by use of the Ott-Grebogi-Yorke method. This procedure has been recently applied to controlling chaotic phenomena in physical, chemical and biological systems. We adopt this method successfully for Feichtinger's generic model of two competing firms with asymmetrical investment strategies. We show that the application of this control method to the particular economic process considered brings a substantial advantage: one can easily switch form a chaotic trajectory to a regular periodic orbit and simultaneously improve the system's economic properties. Numerical simulations are presented in order to illustrate the effectiveness of the whole procedure. Coauthors are Tilo Hagel, Gunter Haag, and Wolfgang Weidlich.

Date: 1996
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