- Heterogeneous beliefs and the non-linear cobweb model.
- Amserdam / Rotterdam: Tinbergen Institute
- Tinbergen Institute Discussion Papers
- Volume | Edition (Serie)
- TI 1997-115/1
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
See the publication in the Journal of Economic Dynamics and Control (2000), 34(2), 761-798.
This paper investigates price fluctuations in an evolutionary cobweb model with heterogeneous beliefs. Agents choose between free naive expectations and costly rational expectations, and update their beliefs according to a "fitness" measure such as past realized net profits. For non-linear, monotonic demand and supply curves, it is shown that the evolutionary dynamics exhibits bifurcation routes to strange attractors when the intensity of choice to switch prediction strategies increases.
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