Book contents
- Frontmatter
- Contents
- Figures
- Preface
- 1 Introduction
- 2 Bifurcations and chaos in 1-D systems
- 3 Bifurcations and strange attractors in 2-D systems
- 4 The nonlinear cobweb model
- 5 The cobweb model with heterogeneous expectations
- 6 An asset pricing model with heterogeneous beliefs
- 7 Empirical validation
- 8 Laboratory experiments
- Bibliography
- Index
5 - The cobweb model with heterogeneous expectations
Published online by Cambridge University Press: 05 February 2013
- Frontmatter
- Contents
- Figures
- Preface
- 1 Introduction
- 2 Bifurcations and chaos in 1-D systems
- 3 Bifurcations and strange attractors in 2-D systems
- 4 The nonlinear cobweb model
- 5 The cobweb model with heterogeneous expectations
- 6 An asset pricing model with heterogeneous beliefs
- 7 Empirical validation
- 8 Laboratory experiments
- Bibliography
- Index
Summary
In the previous chapter we have focused on a representative behaviorally rational agent in the nonlinear cobweb model. But why would all agents have the same individual expectations? Agents are heterogeneous and laboratory experiments have shown that, even when facing the same information, individuals may disagree and take different strategic consumption, production or investment decisions. In a complex market environment it seems more appropriate to model agents as boundedly rational and heterogeneous, using different types of strategies. In this chapter, therefore, we study the cobweb model with heterogeneous expectations. The cobweb model provides a simple framework to study the interactions of heterogeneous expectation rules and the aggregate behavior resulting from these interactions.
Models with heterogeneous agents are becoming increasingly popular. In particular, in finance models with fundamentalists and chartists have received much attention. Examples include Zeeman (1974), Frankel and Froot (1986), Day and Huang (1990), DeLong et al. (1990a and b), Kirman (1991), Lux (1995), Brock and Hommes (1998) and DeGrauwe and Grimaldi (2006); see the reviews of Hommes (2006) and LeBaron (2006) with many more references.
- Type
- Chapter
- Information
- Publisher: Cambridge University PressPrint publication year: 2013