Abstract
Chaos occurs in a nonlinear cobweb model with normal demand and supply, naive expectations and adaptive production adjustment. The model differs from existing ones in that it includes adaptive production adjustment instead of adaptive expectations. The model exhibits observable chaos (strange attractors) as well as topological chaos (horseshoes) associated with homoclinic points. As numerical simulations show, the faster suppliers adjust their production and the more inelastic demand is, the more likely the market behaves chaotically.
| Original language | English |
|---|---|
| Pages (from-to) | 101-115 |
| Number of pages | 15 |
| Journal | Journal of Economic Behavior and Organization |
| Volume | 41 |
| Issue number | 2 |
| Publication status | Published - Feb 2000 |
| Externally published | Yes |
Keywords
- Adaptive production adjustment
- D21
- E32
- Homoclinic point
- Nonlinear cobweb model
- Observable chaos
- Topological chaos
ASJC Scopus subject areas
- Economics and Econometrics
- Organizational Behavior and Human Resource Management