This study constructs a heterogeneous agents model of a …nancial market in a continuous time framework. There are two types of agents, fundamentalists and chartists. The former follows the traditional e¢ ciency market theory and has a linear demand function whereas the latter experiences delays in the formation of price trends and possesses a S-shaped demand function. The main feature of this study is a theoretical investigation on the e¤ects caused by two time delays in a price adjustment process. In particular, two main results are demonstrated: one is that the stability switching curves are analytically derived and the other is that the stability losses and gains can repeatedly occur when the shape of the curves are meandering. Although it is well known that a time delay has a destabilizing e¤ect, these results imply that multiple delays can stabilize and destabilize a market price generating persistent deviations from the stationary price.
Keywords Heterogeneous agents model Two time delays Limit cycle Double edge e¤ect Stability switching curveThe authors highly appreciate the …nancial supports from the MEXT-