On the significance of borders

Kubin, Ingrid and Gardini, Laura (2018) On the significance of borders. Department of Economics Working Paper Series, 266. WU Vienna University of Economics and Business, Vienna.

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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.

Item Type: Paper
Keywords: capacity constraint, depreciation constraint, nonnegativity constraint, piecewise smooth system, border collision bifurcation, centre bifurcation
Classification Codes: JEL C61, C63
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 06 Aug 2018 11:33
Last Modified: 22 Oct 2019 00:41
FIDES Link: https://bach.wu.ac.at/d/research/results/88308/
URI: https://epub.wu.ac.at/id/eprint/6449

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