Abstract:

The classic evolutionary cobweb model with heterogeneous expectations has been extensively developed since it was proposed by Brock and Hommes， and has been deeply applied in the aspects of stocks， futures and asset pricing.However， unlike Western countries， state-owned enterprises play an important role in the national economy of China and have made important contributions to the healthy and stable development of Chinese economy. Therefore， state-owned enterprises whose goal is to maximize national welfare are included in the model of Brock and Hommes. Not only that，the variability of the number of private firms is considered since we observe that firms in the real economy are not static and private firms aiming to maximize their own profits are always entering and exiting the market. A cobweb model of heterogeneous expectations with state-owned enterprises and a variable number of private enterprises which is more in line with China’s reality are considered.It is found that with the change of private enterprises' intensity of choice to switch predictors and production technology， the entire market will have complex dynamic characteristics， such as bifurcations and chaos. With the increase of private enterprises' intensity of choice to switch predictors， the complexity of the market equilibrium continues to increase， while the degree of market competition first increases and then decreases， while consumer welfare first increases and then falls into a cyclical cycle or even chaos. What’s more， the degree of market stability and competition of manufacturers varies with different production technologies. Under the condition of medium technology level， the market competition is more intense and market stability is difficult to achieve. Finally， it is found that state-owned enterprises play an irreplaceable role in stabilizing the market， and this stabilizing role continues to become prominent with the increase in the level of production technology. The results of this paper are of practical significance for analyzing the stability of the market and the necessity of the existence of state-owned enterprises.

Key words: heterogeneous expectations, exit and entry, cobweb model, stability