Complex dynamics in a cobweb model with adaptive production adjustment

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.