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Nonlinear Dynamical Systems in Economics pp 131–164Cite as

Heterogeneous Agent Models: two simple examples

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Part of the book series: CISM International Centre for Mechanical Sciences ((CISM,volume 476))

Abstract

These notes review two simple heterogeneous agent models in economics and finance. The first is a cobweb model with rational versus naive agents introduced in Brock and Hommes (1997). The second is an asset pricing model with fundamentalists versus technical traders introduced in Brock and Hommes (1998). Agents are boundedly rational and switch endogenously between different trading strategies, based upon an evolutionary fitness measure given by realized past profits. Evolutionary switching creates a nonlinearity in the dynamic models. Rational routes to randomness, that is, bifurcation routes to complicated dynamical behavior occur when agents become more sensitive to differences in evolutionary fitness.

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Author information

Authors and Affiliations

  1. CeNDEF, Department of Quantitative Economics, University of Amsterdam, Amsterdam, The Netherlands

    Cars Hommes

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  1. Cars Hommes
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Editors and Affiliations

  1. University of Udine, Italy

    Marji Lines

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Hommes, C. (2005). Heterogeneous Agent Models: two simple examples. In: Lines, M. (eds) Nonlinear Dynamical Systems in Economics. CISM International Centre for Mechanical Sciences, vol 476. Springer, Vienna. https://doi.org/10.1007/3-211-38043-4_5

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  • DOI: https://doi.org/10.1007/3-211-38043-4_5

  • Publisher Name: Springer, Vienna

  • Print ISBN: 978-3-211-26177-4

  • Online ISBN: 978-3-211-38043-7

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