Discussion Paper

No. 2012-17 | March 21, 2012
Cobweb Theorems with Production Lags and Price Forecasting

Abstract

The classical cobweb theorem is extended to include production lags and price forecasts. Price forecasting based on a longer period has a stabilizing effect on prices. Longer production lags do not necessarily lead to unstable prices; very long lags lead to cycles of constant amplitude. The classical cobweb requires elasticity of demand to be greater than that of supply; this is not necessarily the case in a more general setting, price forecasting has a stabilizing effect. Random shocks are also considered.

JEL Classification

D58 C02 C65 C62 E32

Cite As

Daniel Dufresne and Felisa Vázquez-Abad (2012). Cobweb Theorems with Production Lags and Price Forecasting. Economics Discussion Papers, No 2012-17, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-17

Assessment



Comments and Questions


Anonymous - Referee Report 1
May 25, 2012 - 08:55

see attached file


Anonymous - Referee Report 2
June 05, 2012 - 08:28

see attached file


Daniel Dufresne and Felisa J. Vázquez-Abad - Reply to Referee Reports
January 07, 2013 - 09:06

see attached file