The cobweb theorem and delays in adjusting supply in metals' markets

Glöser‐Chahoud, Simon; Hartwig, Johannes; Wheat, I. David; Faulstich, Martin

doi:10.1002/sdr.1565

Cited by 15 publications

(7 citation statements)

References 46 publications

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“…Contrasting the role of expectations models in cobweb theory, John Carlson (1967) does not even include rational expectations as an alternative. Empirical contributions referencing cobweb theory have persisted, continuing work by agricultural economists on the hog cycle, e.g., Hovac Talpaz (1974), Jean-Paul Chavas (1999), and Parker and Shonkwiler (2014); and on metals markets, e.g., Glöser-Chahoud et al (2016). There has also been recent work on cobweb theory for vertically integrated and interlinked markets; e.g., Chaudry and Miranda (2018), and Liv Lundberg et al (2015).…”

Section: Cobweb Theory After Muthmentioning

confidence: 99%

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Cobweb Theory, Market Stability, and Price Expectations

Poitras¹

2023

J Hist Econ Thought

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Contributors to cobweb theory include many leading economists of the twentieth century. From early beginnings in 1930, cobweb theory played a key role in evolving perceptions of market stability arising from recursive linear models with endogenous dynamics. The focal point of this evolution in cobweb theory is the transition from naive to adaptive to rational price expectations. After a review of the prehistory, this paper examines the first wave of linear cobweb theory initiated by Jan Tinbergen, Henry Schultz, and Umberto Ricci and proceeds to consider the evolution of price expectations in the second wave of cobweb models associated with endogenous cycles in commodity markets. The role of modern cobweb theory in discussions about the stability of market equilibrium and the connection to processes with rational expectations is assessed.

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Section: Cobweb Theory After Muthmentioning

confidence: 99%

“…As such, cobweb theory directs attention to empirical and theoretical properties associated with stability of markets. The model continues to attract contributions, e.g., Christophe Gouel (2012); Simon Glöser-Chahoud et al (2016); Muhammad Chaudhry and Mario Miranda (2018).…”

Section: Introductionmentioning

confidence: 99%

Cobweb Theory, Market Stability, and Price Expectations

Poitras¹

2023

J Hist Econ Thought

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“…Mining projects take five to ten years to complete. Conversely, mine production is difficult to throttle so that the capacities can continue to be used for production as long as the prices are above the variable costs (Glöser-Chowhound, Hartwig, Wheat & Faulstich, 2017).…”

Section: Related Literaturementioning

confidence: 99%

The Effects of Demand and Interest Rates on Investments, Evidence of Overinvestment from Two Behavioral Experiments

Conrad¹

2022

AEF

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This article analyzes the causes of overinvestment and thus investment cycles with two behavioral experiments. In the experimental simulations increases in demand and cuts in interest rates increased unit profits, which led to uncoordinated and thus collectively too high investments (collective error). This made it possible to demonstrate collective errors that led to overinvestment and investment cycles (boom and bust cycles). Central banks and companies should take this into account when making their decisions. The experiments show the fundamental problem of uncoordinated supply adjustment and a tendency on the part of market participants to neglect the behavior of other actors and to underestimate the influence of the market on their own investment decisions.

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“…Their model extends prevalent formulations of diffusion processes of innovations in system dynamics by accounting for repeated decisions about the daily use of an innovation. Glöser-Chahoud et al (2016) applied the SD approach for modelling dynamic relations between raw material markets in global sectors and commodity price fluctuations. Their model used both market dynamics and technical aspects of raw material processing.…”

Section: Sectoral Innovation System (Sis)mentioning

confidence: 99%

Modelling techno-sectoral innovation system

Azad

Khodabakhsh

Roshannafas

et al. 2019

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Purpose This study aims to scrutiny the performance of the petrochemical sector and the technological innovation life cycle. Also, the stage of the innovation life cycle for the sector is specified. Then, scenarios are designed to improve the speed of the sector development. For this reason, for synchronizing the petrochemical sector, this study tries to combine two innovation systems (technological and sectoral systems) called “techno-sectoral innovation system” under an integrated model. Furthermore, the “functions and driving motors” are expanded in the proposed model. Design/methodology/approach By combining two concepts of the innovation systems, the complexity of the system rises to some extent. Also, to model causal relationships in the sector and non-linear connections between variables, system dynamics approach is applied. During this phase, the flow diagram of the model is translated to a simulation programme using Vensim software. Model validation is investigated using a comparison of the actual with simulated values. Findings The results predict the functions state of the innovation system and detect activation of innovation motors in each stage of the innovation life cycle. Validation shows the acceptable error of the indices. It can be concluded that the sector is relatively in the development state. Four scenarios have been proposed for representing policies that sector uses to motivate its companies. The best scenario is the fourth one that divides resources with different weightings among companies to accelerate switching time between sector’s motors. Finally, the fourth scenario can improve the performance of the petrochemical. Originality/value The hybrid approach shows researchers that performance of an industry can be improved based on sectoral and technological at the same time. Thus, this case-based model can contribute to other researchers, as a base model. Also, it could be customized with parameters and the relationship between players and functions. Furthermore, a dynamic switch among the motors has been presented in the model.

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The cobweb theorem and delays in adjusting supply in metals' markets

Cited by 15 publications

References 46 publications

Cobweb Theory, Market Stability, and Price Expectations

Cobweb Theory, Market Stability, and Price Expectations

The Effects of Demand and Interest Rates on Investments, Evidence of Overinvestment from Two Behavioral Experiments

Modelling techno-sectoral innovation system

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