
handle: 2158/1403761
This paper proposes a simple, stylized two-good, two-market dynamical cobweb model. Consumers and producers are located in two countries, where they can choose to consume either locally produced or imported goods. We introduce a heuristic rule for consumers, which considers a convex combination of purchasing the cheapest good and the expected intrinsic quality of the two goods. Numerical simulations demonstrate that the interconnection between markets is a primary driver of instability, manifesting through either a flip or a Hopf bifurcation. Additionally, the dynamics depend closely on the price-quality trade-off. We identify three scenarios: when only price matters, a stable period-2 cycle arises; when only quality matters, the system converges; and in intermediate cases, complex dynamics emerge. Notably, we discovered a boundary crisis region, where there is a sudden shift from a chaotic attractor to stability. Finally, as a brief extension, we analyze the system when tariffs are considered for policy purposes.
Interacting Markets, HAM, Trade, Consumer Choice, Consumer Heuristics Dynamical Systems
Interacting Markets, HAM, Trade, Consumer Choice, Consumer Heuristics Dynamical Systems
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