New BERG Working Paper No. 174 by Roberto Dieci, Sarah Mignot and Frank Westerhoff published!
In the BERG Working Paper Series Roberto Dieci, Sarah Mignot and Frank Westerhoff have published a new paper entitled "Production delays, technology choice and cyclical cobweb dynamics".
A complete overview of all BERG Working Papers published so far can be found here.
We develop a cobweb model in which firms, facing a two-period production delay, have access to a flexible (costly) and an inflexible (cheap) production technology. Moreover, firms select between production technologies depending on their evolutionary fitness, measured in terms of past realized profits. The dynamics of our cobweb model is driven by a four-dimensional nonlinear map. We analytically show that its unique steady state may become unstable due to a Neimark-Sacker bifurcation, a scenario that gives rise to cyclical price dynamics, as observed in actual commodity markets. Simulations furthermore reveal that our cobweb model may also produce chaotic motion.