IDEAS home Printed from https://ideas.repec.org/p/osf/osfxxx/xsemj.html
   My bibliography  Save this paper

Cobweb Theory, Market Stability and Price Expectations

Author

Listed:
  • Poitras, Geoffrey

Abstract

Contributors to cobweb theory include many leading economists of the 20th 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 pre-history, this paper examines the first wave of linear cobweb theory initiated by Tinbergen, Schultz and Ricci and proceeds to consider the evolution of price expectations in the second wave of cobweb models associated with endogenous cycles in commodity markets. Finally, the role of modern cobweb theory in discussions surrounding the stability of market equilibrium and the connection to processes with rational expectations is assessed.

Suggested Citation

  • Poitras, Geoffrey, 2022. "Cobweb Theory, Market Stability and Price Expectations," OSF Preprints xsemj, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:xsemj
    DOI: 10.31219/osf.io/xsemj
    as

    Download full text from publisher

    File URL: https://osf.io/download/62519e509e3fb8133ca571ec/
    Download Restriction: no
    File URL: https://libkey.io/10.31219/osf.io/xsemj?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Simon Glöser-Chahoud & Johannes Hartwig & I. David Wheat & Martin Faulstich, 2016. "The cobweb theorem and delays in adjusting supply in metals' markets," System Dynamics Review, System Dynamics Society, vol. 32(3-4), pages 279-308, July.
    2. Joseph J. Spengler, 1984. "Boisguilbert's Economic Views vis-à-vis those of Contemporary Réformateurs," History of Political Economy, Duke University Press, vol. 16(1), pages 69-88, Spring.
    3. Working, Holbrook, 1922. "Factors Determining the Price of Potatoes in St. Paul and Minneapolis," Technical Bulletins 7528, University of Minnesota, Agricultural Experiment Station.
    4. Day, Richard H & Tinney, E Herbert, 1969. "Cycles, Phases and Growth in a Generalised Cobweb Theory," Economic Journal, Royal Economic Society, vol. 79(313), pages 90-108, March.
    5. Lundberg, Liv & Jonson, Emma & Lindgren, Kristian & Bryngelsson, David & Verendel, Vilhelm, 2015. "A cobweb model of land-use competition between food and bioenergy crops," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 1-14.
    6. Marc Nerlove, 1956. "Estimates of the Elasticities of Supply of Selected Agricultural Commodities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 38(2), pages 496-509.
    7. Alain Raybaut, 2013. "Henry Ludwell Moore et le complément dynamique de l’économie pure," Post-Print hal-00861071, HAL.
    8. H. M. Boot, 1983. "James Wilson and the Commercial Crisis of 1847," History of Political Economy, Duke University Press, vol. 15(4), pages 567-583, Winter.
    9. Marc Nerlove, 1961. "The Use of Adaptive Expectations in Stability Analysis: Reply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(2), pages 335-338.
    10. Chavas, Jean-Paul, 1999. "On The Economic Rationality Of Market Participants: The Case Of Expectations In The U.S. Pork Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(1), pages 1-19, July.
    11. Stephen J. Turnovsky, 1968. "Stochastic Stability of Short-Run Market Equilibrium under Variations in Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(4), pages 666-681.
    12. Mordecai Ezekiel, 1938. "The Cobweb Theorem," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 52(2), pages 255-280.
    13. Chaudhry, Muhammad Imran & Miranda, Mario J., 2018. "Complex price dynamics in vertically linked cobweb markets," Economic Modelling, Elsevier, vol. 72(C), pages 363-378.
    14. Samuelson, Paul A, 1976. "Optimality of Sluggish Predictors under Ergodic Probabilities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(1), pages 1-7, February.
    15. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    16. John M. Cassels, 1933. "The Nature of Statistical Supply Curves," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(2), pages 378-387.
    17. Matthew T. Holt & Lee A. Craig, 2006. "Nonlinear Dynamics and Structural Change in the U.S. Hog—Corn Cycle: A Time-Varying STAR Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 215-233.
    18. Anon, 2002. "The Economy of Influence," Environment and Planning A, , vol. 34(8), pages 1331-1332, August.
    19. Holt, Matthew T. & Craig, Lee A., 2006. "AJAE Appendix: Nonlinear Dynamics and Structural Change in the U.S. Hog-Corn Ratio: A Time-Varying Star Approach," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 88(1), pages 1-16, February.
    20. Arnold P. Collery, 1955. "Expected Price and the Cobweb Theorem," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(2), pages 315-317.
    21. Pomini, Mario, 2018. "Economic Dynamics And The Calculus Of Variations In The Interwar Period," Journal of the History of Economic Thought, Cambridge University Press, vol. 40(1), pages 57-79, March.
    22. Henry Schultz, 1932. "The Shifting Demand for Selected Agricultural Commodities, 1875–1929," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 14(2), pages 201-227.
    23. Warren Young & William Darity, Jr., 2001. "The Early History of Rational and Implicit Expectations," History of Political Economy, Duke University Press, vol. 33(4), pages 773-813, Winter.
    24. Arnold B. Larson, 1964. "The Hog Cycle as Harmonic Motion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 46(2), pages 375-386.
    25. Raybaut, Alain, 2013. "Henry Ludwell Moore and the Dynamic Complement of Pure Economics," OEconomia, Editions NecPlus, vol. 2013(02), pages 221-240, June.
    26. Gianfranco Tusset, 2009. "The Italian contribution to early economic dynamics," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 16(2), pages 267-300.
    27. Henky Ludwell Moore, 1925. "A Moving Equilibrium of Demand and Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 39(3), pages 357-371.
    28. Edwin S. Mills, 1961. "The Use of Adaptive Expectations in Stability Analysis: Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(2), pages 330-335.
    29. Gustav Åkerman, 1957. "The Cobweb Theorem: A Reconsideration," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 71(1), pages 151-160.
    30. L. H. Bean, 1929. "The Farmers' Response to Price," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 11(3), pages 368-385.
    31. Esther-Mirjam Sent, 2002. "How (Not) to Influence People: The Contrary Tale of John F. Muth," History of Political Economy, Duke University Press, vol. 34(2), pages 291-320, Summer.
    32. Philip Mirowski, 1990. "Problems in the Paternity of Econometrics: Henry Ludwell Moore," History of Political Economy, Duke University Press, vol. 22(4), pages 587-609, Winter.
    33. William G. Tomek, 1965. "Changes in Price Elasticities of Demand for Beef, Pork, and Broilers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 47(3), pages 793-802.
    34. Arthur A. Harlow, 1960. "The Hog Cycle and the Cobweb Theorem," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 42(4), pages 842-853.
    35. Gallas, Jason A. C. & Nusse, Helena E., 1996. "Periodicity versus chaos in the dynamics of cobweb models," Journal of Economic Behavior & Organization, Elsevier, vol. 29(3), pages 447-464, May.
    36. Gerald W. Dean & Earl O. Heady, 1958. "Changes in Supply Response and Elasticity for Hogs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 40(4), pages 845-860.
    37. Fox, Karl A., 1953. "The Analysis of Demand for Farm Products," Technical Bulletins 156646, United States Department of Agriculture, Economic Research Service.
    38. Hovav Talpaz, 1974. "Multi-Frequency Cobweb Model: Decomposition of the Hog Cycle," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 38-49.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jianru Fu & Ruiyuan Shen & Chao Huang, 2023. "How does price insurance alleviate the fluctuation of agricultural product market? A dynamic analysis based on cobweb model," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(5), pages 202-211.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christopher L. Gilbert & Duo Qin, 2005. "The First Fifty Years of Modern Econometrics," Working Papers 544, Queen Mary University of London, School of Economics and Finance.
    2. Skold, Karl Durwood, 1989. "The integration of alternative information systems: an application to the Hogs and Pigs report," ISU General Staff Papers 1989010108000010239, Iowa State University, Department of Economics.
    3. Christopher L. Gilbert & Duo Qin, 2005. "The First Fifty Years of Modern Econometrics," Working Papers 544, Queen Mary University of London, School of Economics and Finance.
    4. Tomek, William G. & Robinson, Kenneth L., 1977. "PART V. Agricultural Price Analysis and Outlook," AAEA Monographs, Agricultural and Applied Economics Association, number 337217, january.
    5. Atle Oglend & Frank Asche, 2016. "Cyclical non-stationarity in commodity prices," Empirical Economics, Springer, vol. 51(4), pages 1465-1479, December.
    6. Holst, Carsten & von Cramon-Taubadel, Stephan, 2012. "International Synchronisation of the Pork Cycle," Acta Oeconomica et Informatica, Faculty of Economics and Management, Slovak Agricultural University in Nitra (FEM SPU), vol. 15(1), pages 1-6, March.
    7. Stępień Sebastian & Polcyn Jan, 2016. "The phenomenon of cyclical fluctuations on the pork market - global perspective," Management, Sciendo, vol. 20(1), pages 382-396, May.
    8. Chaudhry, Muhammad Imran & Miranda, Mario J., 2018. "Complex price dynamics in vertically linked cobweb markets," Economic Modelling, Elsevier, vol. 72(C), pages 363-378.
    9. Christoph Engel & Hanjo Hamann, 2012. "The Hog-Cycle of Law Professors," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_08, Max Planck Institute for Research on Collective Goods.
    10. Hertzler, Greg & Cothern, James H., 1979. "The Sub-Optimality Of The Beef Cycle," 1979 Annual Meeting, July 29-August 1, Pullman, Washington 278293, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. SaangJoon Baak, 1999. "Heterogeneous Expectations, Market Dynamics, and Social Welfare," Computing in Economics and Finance 1999 222, Society for Computational Economics.
    12. Emeric Lendjel, 2000. "The statistical origin of the cobweb diagram," Post-Print halshs-03243880, HAL.
    13. SaangJoon Baak, 2000. "Heterogeneous Expectations, Volatility and Welfare," Working Papers EMS_2000_01, Research Institute, International University of Japan.
    14. Emeric Lendjel, 1998. "L'origine statistique du diagramme du cobweb," Working Papers halshs-00268370, HAL.
    15. Gangyi WANG & Runxiang SI & CuiXia LI & GuiTong ZHANG & Nengyue ZHU, 2018. "Asymmetric price transmission effect of corn on hog: evidence from China," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 64(4), pages 186-196.
    16. Roberta Sardone & Valentina Cardinale & Crescenzo Dell’aquila & Paola Doria & Roberto Solazzo & Alfredo Manuel Coelho & Etienne Montaigne & Vasco Boatto & Andrea Dal Bianco & Luigi Galletto & Luca Ros, 2012. "The liberalisation of planting rights in the EU wine sector," Working Papers hal-01499067, HAL.
    17. Md Zabid Iqbal & Bruce A. Babcock, 2018. "Global growing‐area elasticities of key agricultural crops estimated using dynamic heterogeneous panel methods," Agricultural Economics, International Association of Agricultural Economists, vol. 49(6), pages 681-690, November.
    18. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    19. Berg, Ernst & Huffaker, Ray, 2015. "Economic Dynamics of the German Hog-Price Cycle," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 6(2), pages 1-17, July.
    20. Christoph Engel & Hanjo Hamann, 2016. "The Hog Cycle of Law Professors: An Econometric Time Series Analysis of the Entry-Level Job Market in Legal Academia," PLOS ONE, Public Library of Science, vol. 11(7), pages 1-22, July.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:osf:osfxxx:xsemj. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: OSF (email available below). General contact details of provider: https://osf.io/preprints/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.