MURPHYS-HSFS-2014 - 7th International Workshop on Multi-Rate Processes & Hysteresis, 2nd International Workshop on Hysteresis and Slow-Fast Systems, April 7-11, 2014 - Abstract

Göcke, Matthias

Play-hysteresis in supply or in demand as part of a market model

Consequences of economic hysteresis are illustrated based on a standard market model which is extended by hysteresis dynamics. Aggregate market hysteresis is implemented by modelling continuous dynamics in a simple linearized way, similar to "mechanical play". Both cases, hysteresis in supply and demand are analysed separately. Explicitly modelling supply versus demand side hysteresis has two advantages: (1) Since (hysteretic) supply or demand are only subsystems of the entire market, persistent endogenous feedback effects on price and quantity are captured. (2) Differences in the remanent effects of exogenous transient shocks between the two cases, demand and supply hysteresis, become obvious.