Instability and bifurcation in a trend depending price formation model

preprint2013arXivOpen access

Abstract

A well-known model due to J.-M. Lasry and P.L. Lions that presents the evolution of prices in a market as the evolution of a free boundary in a diffusion equation is suggested to be modified in order to show instabilities for some values of the parameters. This loss of stability is associated to the appearance of new types of solutions, namely periodic solutions, due to a Hopf bifurcation and representing price oscillations, and traveling waves, that represent either inflationary or deflationary behavior.

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