Stability and cycles in a cobweb model with heterogeneous expectations
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We investigate the dynamics of a cobweb model with heterogeneous beliefs, generalizing the example of Brock and Hommes (1997). We examine situations where the agents form expectations by using either rational expectations, or a type 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 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.
Lasselle , L , Svizzero , S & Tisdell , C 2005 , ' Stability and cycles in a cobweb model with heterogeneous expectations ' Macroeconomic Dynamics , vol 9 , no. 5 , pp. 630-650 . DOI: 10.1017/S1365100505050017
(c)2005 Cambridge University Press
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