HOG CYCLE COMPUTER SIMULATION MODELLING

In the first section a preliminary model of well known hog cycle is presented. The model catches the main feature of the hog cycle, namely the natural delay between investment and production ('delayed response effects'). Intentionally the model was constructed in such a way that in the further stages of development it can be used as a metaphor for more general model of business cycles. In the second part of the paper a simulation study of the hog cycle model is presented. It is shown that a delayed response effect is important factor causing cyclical mode of development but it is hardly to say that it is the only necessary factor causing cycles emergence. Emergence of fluctuations requires a tuning of different factors, such as the investment delay, the price delay, sensitivity of producers (farmers) to react on signals flowing from the market, the growth rate of the market, price elasticity of demand. It is shown also that, contrary to common view, in the long term, the hog cycle causes higher average profit of farmers compare to the situation of forcing smooth (no cycle) mode of development.