Stability and Cycles in a Cobweb Model with Heterogeneous Expectations

Laurence Lasselle, Serge Svizzero and Clement Tisdell

No ECO2004/03, Economics Working Papers from European University Institute

Abstract: We investigate the dynamics of a cobweb model with heterogeneous beliefs, generalising the example of Brock and Hommes (1997). We examine situations where the agents form expectations by using either perfect foresight, or a form of adaptive expectations with limited memory defined from the last two prices. We specify conditions that generate cycles. These conditions depend on a set of factors that includes the proportion of rational agents, the intensity of switching between beliefs, and the adaption parameter. We show that both Flip bifurcation and Neimark-Sacker bifurcation can occur as primary bifurcation when the steady state is unstable.

Keywords: bounded rationality; cobweb model; flip bifurcation; neimark-sacker bifurcation; rational expectations (search for similar items in EconPapers)
JEL-codes: C62 D84 E30 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: STABILITY AND CYCLES IN A COBWEB MODEL WITH HETEROGENEOUS EXPECTATIONS (2005)
Working Paper: Stability and cycles in a cobweb model with heterogeneous expectations (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eui:euiwps:eco2004/03

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