Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86201
Authors: 
Hommes, Cars
Year of Publication: 
2005
Series/Report no.: 
Tinbergen Institute Discussion Paper 05-055/1
Abstract: 
These notes review two simple heterogeneous agent models in economics and finance. The first is a cobweb model with rational versus naive agents introduced in Brock and Hommes (1997). The second is an asset pricing model with fundamentalists versus technical traders introduced in Brock and Hommes (1998). Agents are boundedly rational and switch between different trading strategies, based upon an evolutionary fitness measure given by realized past profits. Evolutionary switching creates a nonlinearity in the dynamics. Rational routes to randomness, that is, bifurcation routes to complicated dynamical behaviour occur when agents become more sensitive to differences in evolutionary fitness.
Subjects: 
interacting agents
complex adaptive systems
evolutionary dynamics
bounded rationality
nonlinear dynamics
bifurcations and chaos.
JEL: 
B4
C0
C6
D84
E3
G1
G12
Document Type: 
Working Paper

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