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 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 |