Interacting cobweb markets

Roberto Dieci () and Frank Westerhoff
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Roberto Dieci: Department of Mathematics for Economics and Social Sciences - UNIBO - Alma Mater Studiorum Università di Bologna = University of Bologna

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Abstract: We enrich the classical cobweb framework by allowing producers to enter different markets. The market entry decision is repeated every period and depends on the markets' historical profit differentials. As a result, the number of producers in a market and thus also a market's total supply vary over time. Analytical and numerical investigations of our four-dimensional nonlinear model indicate that interacting cobweb markets may contribute to the strong cyclical price motion observed in many commodity markets. We furthermore find that endogenous dynamics may either set in via a Flip or a Neimark-Sacker bifurcation. Interestingly, the latter scenario is prevalent if producers are sufficiently risk averse.

Keywords: C62; E32; Q11; price fluctuations; market interactions; risk aversion; nonlinear dynamics; bifurcation analysis (search for similar items in EconPapers)
Date: 2010-07-31
Note: View the original document on HAL open archive server: https://hal.science/hal-00849411
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Citations: View citations in EconPapers (25)

Published in Journal of Economic Behavior and Organization, 2010, 75 (3), pp.461. ⟨10.1016/j.jebo.2010.05.004⟩

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Journal Article: Interacting cobweb markets (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00849411

DOI: 10.1016/j.jebo.2010.05.004

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