Robust Ergodic Chaos in Discounted Dynamic Optimization Models

Abstract

It is by now well-known that a variety of models in economics gives rise to discrete time, non-linear processes of the form

$$ {x_{t + 1}} = h({x_t}) $$

((1.1))

where the function h satisfies the Li-Yorke condition for “chaotic” or “complex” behavior. Besides the relative abundance of examples of chaos, yet another theme has rightly been stressed: quite simple models of economic theory may lead to such examples.