On the significance of borders

Ingrid Kubin, Laura Gardini

Publication: Working/Discussion PaperWU Working Paper

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Abstract

We propose a prototype model of market dynamics in which all functional relationships are linear. We take into account three borders, defined by linear functions, which are intrinsic to the economic reasoning: non-negativity of prices; downward rigidity of capacity (depreciation) and a capacity constraint for the production decision. Given the linear specification, the borders are the only source for the emerging of cyclical and more complex dynamics. In particular, we discuss centre bifurcations, border collision bifurcations and degenerate flip bifurcations - dynamic phenomena the occurrence of which are intimately related to the existence of borders.
Original languageEnglish
Publication statusPublished - 2018

Publication series

NameDepartment of Economics Working Paper Series
No.266

WU Working Paper Series

  • Department of Economics Working Paper Series

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