An analysis of the cobweb model with boundedly rational heterogeneous producers

Carl Chiarella, Xue Zhong He*, Hing Hung, Peiyuan Zhu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

21 Citations (Scopus)


This paper considers the traditional cobweb model with heterogenous risk averse producers whose supply functions involve their estimates of the conditional mean and variance of the future price. The producers seek to learn these quantities by applying geometric decay processes (GDP) to past prices. The heterogeneity manifests itself in the lag lengths and memory parameters applied to past prices as well as in risk aversion coefficients. We find that each dimension of heterogeneity changes/enriches the cobweb dynamics with respect to the case of homogeneous producers.

Original languageEnglish
Pages (from-to)750-768
Number of pages19
JournalJournal of Economic Behavior and Organization
Issue number4
Publication statusPublished - Dec 2006
Externally publishedYes


  • Bifurcations
  • Bounded rationality
  • Cobweb model
  • Geometric decay learning dynamics
  • Heterogeneity


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