Cobweb theorems with production lags and price forecasting

Daniel Dufresne and Felisa Vázquez-Abad

No 2012-17, Economics Discussion Papers from Kiel Institute for the World Economy

Abstract: The classical cobweb theorem is extended to include production lags and price forecasts. Price forecasting based on a longer period has a stabilizing effect on prices. Longer production lags do not necessarily lead to unstable prices; very long lags lead to cycles of constant amplitude. The classical cobweb requires elasticity of demand to be greater than that of supply; this is not necessarily the case in a more general setting, price forecasting has a stabilizing effect. Random shocks are also considered.

Keywords: Cobweb theorem; production lags; stable markets; price fluctuations (search for similar items in EconPapers)
JEL-codes: C02 C62 C65 D58 E32 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-for, nep-mac and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201217

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