The cobweb model or cobweb theory is an economic model that explains why price

Price

-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...

s might be subject to periodic fluctuations in certain types of market

Market

A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

s. It describes cyclical supply and demand

Supply and demand

Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...

 in a market where the amount produced

Production, costs, and pricing

The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...

 must be chosen before prices are observed. Producers' expectation

Expectation

In the case of uncertainty, expectation is what is considered the most likely to happen. An expectation, which is a belief that is centered on the future, may or may not be realistic. A less advantageous result gives rise to the emotion of disappointment. If something happens that is not at all...

s about prices are assumed to be based on observations of previous prices. Nicholas Kaldor

Nicholas Kaldor

Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...

 analyzed the model in 1934, coining the term 'cobweb theorem' (see Kaldor, 1938 and Pashigian, 2008), citing previous analyses in German by Henry Schultz and U.