Memory,market stability and attractors coexistence in a nonlinear cobweb model |
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Authors: | Ahmad Naimzada |
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Institution: | Department of Economics, Quantitative Methods and Management, University of Milano-Bicocca, Milano, Italy. |
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Abstract: | We investigate the dynamics of a cobweb type model with nonlinear demand and supply curves in which producers make forecasts on future prices with a backward looking expectation formation mechanism: the expected price for the next period is obtained by a weighted average of the prices observed in the last two periods. The study herewith presents aims at confirming the existence of a locally stabilising effect due to the presence of memory, but an increase of memory in price expectations can be globally qualitatively destabilising, in the sense that it leads to coexistence of different attractors with their respective basins of attraction. |
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Keywords: | Cobweb model memory stability bifurcation analysis attractors coexistence Arnold tongues |
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