Dynamics of beliefs and learning under aL-procesess - The heterogeneous case

Carl Chiarella*, Xue Zhong He

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

49 Citations (Scopus)


This paper studies a class of models in which agents' expectations influence the actual dynamics while the expectations themselves are the outcome of some recursive processes with bounded memory. Under the assumptions of heterogeneous expectations (or beliefs) and that the agents update their expectations by recursive L- and general aL-processes, the dynamics of the resulting expectations and recursive schemes are analyzed. It is shown that the dynamics of the system, including stability, instability and bifurcation, are affected differently by the recursive processes. The cobweb model with a simple heterogeneous expectation scheme is employed as an example to illustrate the stability results, the various types of bifurcations and the routes to complicated price dynamics. In particular, the double-edged effect of heterogeneity on the dynamics of the model is demonstrated.

Original languageEnglish
Pages (from-to)503-531
Number of pages29
JournalJournal of Economic Dynamics and Control
Issue number3
Publication statusPublished - 1 Jan 2003
Externally publishedYes


  • Bifurcation
  • Cobweb model
  • General a-process
  • Heterogeneous beliefs
  • Instability
  • Recursive L-process
  • Stability


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