Backward and forward-looking expectations in a chaotic cobweb model.
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 above mentioned 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.
Dipartimento di Istituzioni Economiche e Finanziarie, Università di Macerata, Via Crescimbeni 20-62100, Macerata, Italy. mammana@unimc.it
Cristiana
C
Mammana
Elisabetta
E
Michetti