A cautious price adjustment mechanism: chaotic behavior

Article Abstract:

A study was conducted on a discrete tatonnement process in a two goods economy with a lone price adjustment. The interval of price invariance was found to be easily restricted to the range an equilibrium price if the relative price adjustment is restricted by a maximal rate of price increase of decrease. All types of erratic dynamics could occur within the interval.

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Caution implies profit

Article Abstract:

Perpetual disequilibrium fluctuations may become preferable to a competitive equilibrium in a long-term basis under certain conditions. Cobweb models further show that cautious responses to fluctuating prices may lead to a higher profit in the long term. Profit can even improve as the economy becomes more unstable.

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Chaotic price dynamics, increasing returns and the Phillips curve

Article Abstract:

A simple price adjustment process can be employed to derive a robust result from a chaotic behavior of prices. This can be demonstrated in the price adjustment dynamics of returns-to-scale economies. The long-term statistical characteristics of such as system's behavior can be described via an ergodic measure.

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