Dynamic complexity in a stochastic rationing model

We have constructed a simple discrete-time macroeconomic model founded on individuals' stochastic optimizing behavior. Actual transactions are carried out in a sequence of disequilibrium markets in which the level of aggregate trade is the lesser of aggregate demand and supply, and in which the individual faces all-or-nothing basis stochastic rationing. In such environments, the actual transaction an individual obtains is generally different from the expectation he forms. This difference is a source of macro-dynamics. The paper demonstrates that, through the interactions of individuals in different markets, the expectation adjustment process is inherently nonlinear and generates complex dynamics involving chaos.I am indebted to Professors Richard Day, James Dulgeroff, Hajime Hori, Osamu Kamoike, Masahiro Okuno-Fujiwara, Makoto Towada, Makoto Yano, and two referees of this Journal for helpful comments and many constructive suggestions to improve the quality of this paper substantially. I am grateful to financial support from Tohyo Trust Bank. All remaining errors are my responsibility.