Analysis And Control Of Chaos In The Duopoly Investment Model With Bounded Rationality

Based on China's entry into WTO and the state-owned assets gradually withdrawing, this paper sets up a dynamics model which describes a situation that both foreign enterprises and domestic financial institutions are investing in state-owned enterprises; then brings the duopoly model with bounded rationality into the financial field. We study the model above in detail and make a reference on Chinese economy, so as to keep the reforms of state-owned enterprises going well and the national economy afloat, and avoid the financial crisis. The main content is depicted as follows:1. Make a comprehensive introduction of the stability theory and the research of economic chaos and chaos control.2. The characteristic of current economy is that China's entry into WTO goes on in parallel with the third reform of state-owned enterprises. Under this background, foreign businessmen and domestic financial institutions can launch the competition to invest into the state-owned enterprises, which may not only affect the stability of progress of investment, but also influence steady development of national economy.3. The duopoly discrete investment model with bounded rationality is set up to describe the situation that investors at home and abroad are investing in state-owned enterprises with the state-own assets gradually withdrawing. It analyzes the stability of the fixed points in this model via the stability criterion of discrete-time system and the financial reality. In addition, it figures out the stability region of the dynamic system. Through computer simulation, the research finds that the change of each factor may influence the stability of investment. Moreover; it indicates that the expansion in investment for profit can make system fall into chaos.4. The continuous systems dynamics model is established to describe the act of investment in state-owned enterprises under the same background as the discrete system model mentioned above. We analyze and compare the differences of stability region between the continuous and discrete investment model. At last, it is proved that discrete-time investment may place a premium on chaos. As far as many actions of investing, this conclusion is applicable.5. Obviously, the continuous-time investment is an ideal state. Moreover, this discrete-time investing could bring out destabilization in the process of investment and induce chaos because of the expansion in investment for profit; thereby financial crisis may break out. This research successfully applies the straight-line stabilization method to control chaos, which may arouse when the system is beyond the stability region. The changes of controls parameters are obtained though the simulation, hence, a proper explanation is presented. Finally, the feasible solutions to control chaos are brought out by observing the changes of parameters and the current situation.