Heterogeneous beliefs and the non-linear cobweb model
نویسندگان
چکیده
This paper generalizes the evolutionary cobweb model with heterogeneous beliefs of Brock and Hommes (1997. Econometrica 65, 1059}1095), to the case of non-linear demand and supply. Agents choose between a simple, freely available prediction strategy such as naive expectations and a sophisticated, costly prediction strategy such as rational expectations, and update their beliefs according to an evolutionary &"tness'measure such as past realized net pro"ts. It is shown that, for generic non-linear, monotonic demand and supply curves, the evolutionary dynamics exhibits &rational routes to randomness', that is, bifurcation routes to strange attractors occur when the traders' sensitivity to di!erences in evolutionary "tness increases. ( 2000 Elsevier Science B.V. All rights
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