On the significance of borders

Ingrid Kubin (ingrid.kubin@wu.ac.at) and Laura Gardini (laura.gardini@uniurb.it)

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: We propose a prototype model of market dynamics in which all functional relationships are linear. We take into account three borders, defined by linear functions, which are intrinsic to the economic reasoning: non-negativity of prices; downward rigidity of capacity (depreciation) and a capacity constraint for the production decision. Given the linear specification, the borders are the only source for the emerging of cyclical and more complex dynamics. In particular, we discuss centre bifurcations, border collision bifurcations and degenerate flip bifurcations - dynamic phenomena the occurrence of which are intimately related to the existence of borders.

Keywords: capacity constraint; depreciation constraint; nonnegativity constraint; piecewise smooth system; border collision bifurcation; centre bifurcation (search for similar items in EconPapers)
JEL-codes: C61 C63 (search for similar items in EconPapers)
Date: 2018-08
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Working Paper: On the significance of borders (2018)
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