Cobweb Theory, Market Stability and Price Expectations

Geoffrey Poitras

No xsemj, OSF Preprints from Center for Open Science

Abstract: Contributors to cobweb theory include many leading economists of the 20th century. From early beginnings in 1930, cobweb theory played a key role in evolving perceptions of market stability arising from recursive linear models with endogenous dynamics. The focal point of this evolution in cobweb theory is the transition from naive to adaptive to rational price expectations. After a review of the pre-history, this paper examines the first wave of linear cobweb theory initiated by Tinbergen, Schultz and Ricci and proceeds to consider the evolution of price expectations in the second wave of cobweb models associated with endogenous cycles in commodity markets. Finally, the role of modern cobweb theory in discussions surrounding the stability of market equilibrium and the connection to processes with rational expectations is assessed.

Date: 2022-04-09
New Economics Papers: this item is included in nep-his and nep-pke
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: COBWEB THEORY, MARKET STABILITY, AND PRICE EXPECTATIONS (2023)
Working Paper: Cobweb Theory, Market Stability and Price Expectations (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:xsemj

DOI: 10.31219/osf.io/xsemj

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