Complex dynamics in a cobweb model with adaptive production adjustment

Chaos occurs in a nonlinear cobweb model with normal demand and supply, nai ve expectations and adaptive production adjustment. The model differs from existing ones in that it includes adaptive production adjustment instead of adaptive expectations. The model exhibits observable chaos (strange attrac tors) as well as topological chaos (horseshoes) associated with homoclinic points. As numerical simulations show, the faster suppliers adjust their pr oduction and the more inelastic demand is, the more likely the market behav es chaotically. (C) 2000 Elsevier Science B.V. All rights reserved.