Preferable disequilibrium in a nonlinear cobweb economy

DOI10.1023/A:1018963204380MaRDI QIDQ1808167zbMATH OpenFDO

Authors Akito Matsumoto

Publication date 2 December 1999

Published in Annals of Operations Research (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1023/A:1018963204380

zbMATH Keywords

ergodic chaosmarket dynamicspiecewise-linear dynamicsprofit

Mathematics Subject Classification ID

Ergodic theorems, spectral theory, Markov operators (37A30) Strange attractors, chaotic dynamics of systems with hyperbolic behavior (37D45) Dynamical systems involving maps of the interval (37E05) General equilibrium theory (91B50)

Review text

The paper deals with a piecewise linear mapping on interval as a cobweb model of market dynamics. It is well known that such mappings may produce chaotic dynamics. The purpose is to demonstrate that chaotic fluctuations are sometimes preferable to competitive equilibrium. The author shows with the aid of numerical examples that the long-run average profit and utility obtained in perpetual disequilibrium can be greater than the profit and utility at equilibrium. Piecewise linear Markov mappings are used. A mapping is Markov if the domain is divided into disjoint subintervals and the restriction of the mapping to one subinterval is a homeomorphism onto some subintervals. One-kinked and two-kinked ergodic dynamics are investigated.

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