Journal Article
No. 2013-23 | May 27, 2013
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. Random shocks are also considered.

JEL Classification:

C02, C62, E32

Assessment

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Links

Cite As

Daniel Dufresne and Felisa Vázquez-Abad (2013). Cobweb Theorems with Production Lags and Price Forecasting. Economics: The Open-Access, Open-Assessment E-Journal, 7 (2013-23): 1–49. http://dx.doi.org/10.5018/economics-ejournal.ja.2013-23


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