Nonlinear Dynamics, Psychology, and Life Sciences, Vol. 8, Iss. 4, October, 2004, pp. 511-526
@2004 Society for Chaos Theory in Psychology & Life Sciences

 
 
 

Backward and Forward-Looking Expectations in a Chaotic Cobweb Model

Cristiana Mammana, UniversitÓ di Macerata
Elisabetta Michetti, UniversitÓ degli Studi di Macerata

Abstract: In this study we research the dynamics shown by a cobweb-type model with linear demand, non-invertible supply function and with forward-looking expectations associated to backward looking ones. The study of the dynamics exhibited by our model will show how the presence of forward-looking expectations represents a stabilising factor: As the weight attributed to the abovementioned foreseeing form increases, the system becomes less and less complex until it only generates orbits converging either to the fixed point or to a cycle-2. It is particularly interesting to analyse at the same time the role played by the two forms of expectations considered, both of which contribute to market stabilization.

Keywords: nonlinear cobweb model, backward and forward-looking expectations, chaotic price behaviour, nonautonomous unidimensional map, infinite distributed memory