Speculation - difference between destabilising and self-fulfilling

What is the difference between self-fulfilling and destabilising speculation?

As from the way I read the notes, they mean the same thing...

Thanks.

 

I haven't gone back to look at what the notes say exactly, but I don't think they're mutually exclusive.

Stabilising speculation occurs when consumers/firms believe the price change is temporary. E.g. a decrease in demand will lower the price to P*. If people believe this change is temporary, demand will increase to take advantage of the temporarily low price, while supply will decrease as firms wait for the price to go back up. THis results in a price that sits between the original price and P*.

However, destabilising speculation occurs when consumers/firms believe the price change is a sign of things to come. A decrease in demand lowers the price to P*. If people believe this change to be indicative of future changes, demand will decrease as people wait for the even lower price, while supply will increase as firms will want to get rid of the good before the price drops even further. This results in a price even lower than P*.

Both are examples of self-fulfilling speculation, since in the first case the expectation was that price would go back up, which is what the responses caused it to do, while in the second case the expectation was that price would continue to decrease, which again the responses caused it to do.