Chaotic dynamics in an overlapping generations model with myopic and adaptive expectations

Hung J. Chen*, Ming-Chia Li, Yung J. Lin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

16 Scopus citations

Abstract

In this paper, we study dynamic behavior of an overlapping generations model under three different expectations: perfect foresight, myopic expectations and adaptive expectations. We show that economic transition under myopic or adaptive expectations is very different from that under perfect foresight. When agents are perfectly foresighted, dynamics is simple, with a unique steady state that is globally attracting. However, cycles and chaotic motion can appear under myopic and adaptive expectations. We study the possibility of Li-Yorke chaos under myopic expectations and entropic chaos under adaptive expectations.

Original languageEnglish
Pages (from-to)48-56
Number of pages9
JournalJournal of Economic Behavior and Organization
Volume67
Issue number1
DOIs
StatePublished - 1 Jul 2008

Keywords

  • Adaptive expectations
  • Chaos
  • Myopic expectations
  • Perfect foresight

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