Heterogeneous Expectations, Dynamics, and Stability of Markets

Laurence Lasselle, Serge Svizzero and Clement Tisdell

No 130, Royal Economic Society Annual Conference 2003 from Royal Economic Society

Abstract: This paper examines the role of heterogeneous beliefs in a cobweb model. We proceed in two stages. First, two groups of agents are distinguished. They are either fundamentalists, or chartists. The latter specify the expected price from an adaptive process, the former have a "rational behaviour". Second, agents may choose between rational expectations and an adaptive process. We demonstrate twofold. The market behaviour of fundamentalists compared to chartists promotes market stability. Market stability may emerge depending on the specification of the expectations and the intensity of switching between the two behaviours.

Keywords: cobweb model; switching behaviour; Flip bifurcation; Neimark-Sacker bifurcation; resonance (search for similar items in EconPapers)
JEL-codes: C62 D84 E30 (search for similar items in EconPapers)
Date: 2003-06-04
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Citations: View citations in EconPapers (3)

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Working Paper: Heterogeneous Expectations, Dynamics, and Stability of Markets (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ecj:ac2003:130

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